The Routledge International Handbook to Welfare State Systems 1472449304, 9781472449306

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The Routledge International Handbook to Welfare State Systems

Developing countries may not have full-fledged welfare states like those we find in Europe, but certainly they have welfare state systems. For comparative social policy research the term “welfare state systems” has many advantages, as there are numerous different types/models of welfare state systems around the world. This path-breaking book, edited by Christian Aspalter, brings together leading experts to discuss social policy in 25 countries/regions around the world. From the most advanced welfare state systems in Scandinavia and Western Central Europe to the developing powers of Brazil, China, India, Russia, Mexico and Indonesia, each countryspecific chapter provides a historical overview, discusses major characteristics of the welfare state system, analyzes country-specific problems, as well as critical current and future trends for further discussions, while also providing one additional major focal point/issue for greater ­in-depth analysis. This book breaks new ground in ideal-typical welfare regime theory, identifying now in total 10 worlds of welfare capitalism. It provides broad perspectives on critical challenges which welfare state systems in the developing and developed world alike must address now and in the future. It will be of great interest to all scholars and students of social policy, social development, development and health economists, public policy, health policy, sociology, social work and social policy makers and administrators. This book is a reference book for researchers and social policy administrators; it can also serve as a textbook for courses on comparative social policy, international social policy and international social development. Christian Aspalter is Professor and Former Founding Head of the Social Work and Social Administration Programme at Beijing Normal University–Hong Kong Baptist University, United International College, Zhuhai, China. He is the author of more than 20 books on social policy and has published numerous articles in international journals. He is editor of the book series Routledge Studies in Social Welfare in Asia.

‘This book contains an impressive overview of welfare state systems – and not only in the countries already depicted as welfare states, but with a very strong focus on covering all regions in the world. By this, the book will become an invaluable resource for those interested in different types of welfare states.’ Bent Greve, University of Roskilde, Denmark ‘Edited books on welfare systems are not few in number, but the present one by Christian Aspalter is the only one which is really global and provides readers a true understanding of the divergent social welfare systems which countries and regions around the world have developed in securing for their people better lives.’ Nelson Chow,The University of Hong Kong, Hong Kong ‘The Routledge International Handbook to Welfare State Systems is a book that will prove an invaluable resource for students, faculty, and researchers with an interest in international social policy. This comprehensive collection offers readers an up-to-date account of the complex ways each of the 24 nations covered wrestles with challenges of economic globalization and rapid technological change and how each provides social welfare policies for the care of their most vulnerable citizens.’ Katherine van Wormer, University of Northern Iowa, USA

The Routledge International Handbook to Welfare State Systems

Edited by Christian Aspalter

First published 2017 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2017 selection and editorial matter, Christian Aspalter; individual chapters, the contributors The right of Christian Aspalter to be identified as the author of the editorial material, and of the authors for his individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Aspalter, Christian, editor. Title: The Routledge international handbook to welfare state systems / edited by Christian Aspalter. Description: Abingdon, Oxon ; New York, NY : Routledge, 2017. Identifiers: LCCN 2016026542 | ISBN 9781472449306 (hardback) | ISBN 9781315613758 (ebook) Subjects: LCSH: Welfare state. | Public welfare. | Social policy. Classification: LCC JC479 .R68 2017 | DDC 361.6/5—dc23 LC record available at https://lccn.loc.gov/2016026542 ISBN: 978-1-4724-4930-6 (hbk) ISBN: 978-1-315-61375-8 (ebk) Typeset in Bembo by Apex CoVantage, LLC

To the poor of the world, especially the children!

Contents

List of tables and figures x Notes on contributors xiv Forewordxxvii Prefacexxix  1 Introduction Christian Aspalter

1

  2 Ten worlds of welfare capitalism: an ideal-typical perspective Christian Aspalter

15

  3 Future welfare: an uneven race to the top and/or a polarized world? Peter Abrahamson

41

  4 The Australian welfare state system: with special reference to welfare conditionality – the case of the income management system Philip Mendes

71

  5 The American welfare state system: with special reference to assetand means-tested social assistance programs Peter Abrahamson

87

  6 The Cuban welfare state system: with special reference to universalism Carmelo Mesa-Lago

106

  7 The Mexican welfare state system: with special reference to conditional cash transfer systems Gabriel Martínez

122

  8 The Chilean welfare state system: with special reference to social security privatization Silvia Borzutzky and Mark Hyde

138

vii

Contents

  9 The Brazilian welfare state system: with special reference to the outcomes and performance of the welfare state system Christian Aspalter

155

10 The Nigerian welfare state system: with special reference to the challenges of developing a social security system Bruce Josephson

178

11 The UK welfare state system: with special reference to the mental health care system Paul Taylor and Jason L. Powell

191

12 The Swedish welfare state system: with special reference to inequality and the redistribution paradox Joakim Palme

203

13 The French welfare state system: with special reference to youth unemployment216 Tom Chevalier and Bruno Palier 14 The Belgian welfare state system: with special reference to “targeting within universalism” Bea Cantillon, Diana De Graeve and Natascha Van Mechelen

229

15 The German welfare state system: with special reference to the oldage pension system Karl Hinrichs

244

16 The Austrian welfare state system: with special reference to the longterm care system Kai Leichsenring

258

17 The Swiss welfare state system: with special reference to education policy Jean-Michel Bonvin and Stephan Dahmen

274

18 The Russian welfare state system: with special reference to regional inequality 291 Markus Kainu, Meri Kulmala, Jouko Nikula and Markku Kivinen 19 The Turkish welfare state system: with special reference to human capital development Adem Yavuz Elveren and Tuba I. Agartan

viii

317

Contents

20 The Israeli welfare state system: with special reference to social inclusion John Gal

332

21 The Indian welfare state system: with special reference to social policy and the burden of disease Christian Aspalter

347

22 The Indonesian welfare state system: with special reference to social security extension in the development context Jörg Michael Dostal and Gemati Ekacita Naskoshi

365

23 The Singaporean welfare state system: with special reference to public housing and the Central Provident Fund Youyenn Teo

383

24 The Chinese welfare state system: with special reference to aging of society and social policy Carmel K. M. Lee

398

25 The Hong Kong welfare state system: with special reference to new initiatives in social assistance provision Joe C. B. Leung

419

26 The Taiwanese welfare state system: with special reference to its universal health insurance system Yih-Jiunn Lee and Yeun-Wen Ku

433

27 The South Korean welfare state system: with special reference to the future of social insurance systems Jinsoo Kim and Christina Hießl

451

28 The Japanese welfare state system: with special reference to financing health care, pensions and long-term care in a super-aged society Christian Aspalter and Hubert Liu

469

29 Lessons from around the world: by way of conclusion Christian Aspalter

487

Index492

ix

Tables and figures

Tables 2.1 Advantages and disadvantages of ideal-typical and real-typical methodology compared (in general comparative social policy) 18 2.2 Ideal-typical worlds of welfare capitalism: mapping ideal-typical welfare regimes (in the Weberian sense) 20 42 3.1 Total public social expenditure (% of GDP 1990–2010 and estimates for 2045) 3.2 Health and old-age coverage (latest year) (% of total population and population 65+) 43 50 3.3 Latin American states according to degree of welfare gap (2012) 4.1 Principal income security payments: pensions 73 4.2 Principal income security payments: allowances 73 74 4.3 Principal income security payments: family payments 5.1 EITC income limits and maximum credit amounts 95 5.2 Eligibility for the Supplemental Nutrition Assistance Program and monthly income (in US$) 97 6.1 Health care indicators in Cuba (1989 and 2006–2013) 109 6.2 University enrollment in school years in Cuba (1989/1990, 2007/2008 and 2013/2014)110 6.3 Pensions financial imbalance, pension real value and population aging in Cuba (1989 and 2008–2013) 114 7.1 Value of subsidies in Oportunidades human development program (2013) 129 8.1 Health conditions prioritized under Chile’s universal health care plan 144 9.1 Comparing the first five “ideal-typical” welfare regimes 158 9.2 Unequal access to health care across Brazil (by region): the case of no attending doctors 161 165 9.3 Comparison of welfare outcomes in Latin America 9.4 Types of social assistance benefits and services 171 14.1 Evolution of the at-risk-of-poverty rate (AROP) (pre- and post-transfer), absolute poverty reduction through social transfers, according to household work intensity (WI), plus the proportion of work-poor and work-rich households and indicators of average earnings and median income, Belgium (ECHP 1994–2000 and SILC 2004–2010) 234 15.1 Expenditure on selected items of social protection as percentage of GDP 247 15.2 Combined contribution rate (employer + employee) to social insurance schemes 248 x

Tables and figures

16.1 16.2 16.3 16.4 18.1 18.2 18.3 19.1 21.1 21.2 21.3 21.4

21.5

22.1 22.2 22.3 22.4 22.5 22.6 22.7 24.1 24.2 25.1 26.1 26.2 26.3 26.4 27.1 27.2 27.3 28.1 28.2

Average monthly pension payments by professional categories (2013) 261 The Austrian Long-Term Care Allowance 2014 265 The development of home care services in Austria (mid-1990s to 2013) 266 Development of residential care: places in care homes (2000–2013) 267 Expenditure for social functions by tier of government as a percentage of 294 total expenditure, 2006 Regional disparities in social development indicators, 2012 296 Categories of typology and threshold values, national mean in parentheses 302 The structure of the social security system in Turkey before the reform 318 History of important social policy legislation and regulation in India 348 Comparison of life expectancy (LE) at birth in developing and not yet developing countries over time 354 Comparison of maternal, infant and under-5 mortality rates in developing 354 and not yet developing countries over time Comparison of some major causes for the burden of disease (lack of improved drinking water/sanitation and use of solid fuels) in developing and 355 not-yet-developing countries over time, part 1 Comparison of some major causes for the burden of disease (underweight children aged ≤5; alcohol consumption and prevalence of smoking among adults aged ≥15) in developing and not-yet-developing countries 355 over time, part 2 List of abbreviations 367 Number of pension fund participants 371 Share of total population covered by Indonesian health insurance programs 372 JAMKESMAS benefits 373 Population aged 15+ based on working status 376 Population aged 15+ based on main job status 376 Population aged 15+ based on main working sector 377 Diversity in China 399 Health risk factors in China 410 Profile of CSSA cases in 2001, 2005, 2011 and 2014 (%) 422 Social insurance systems in Taiwan 434 A brief overview of social insurance in Taiwan (unit: 1,000 people) 436 Contribution shared by the government, employer and the insured (%) 441 The continuation of social protection in Taiwan 445 Changes in the government expenditure on social welfare, 1970–2013 (percent of the general budget of government) 452 Portion of social insurance in public social welfare expenditure (1990–2013)453 Application of minimum wage system (persons) 460 Past development of social policy in Japan 471 Comparison of health care outcomes and health care expenditures (selected countries) 479

Figures 6.1 Evolution of the real pension in Cuba (1989–2013) 6.2 Decline of social assistance in Cuba (2006–2012)

115 116 xi

Tables and figures

6.3 The cost of social welfare in Cuba (2006–2013) 117 7.1 Percentage of population in poverty under the income dimension (1992–2012)126 133 7.2 Unemployment rate by educational level 7.3 Population with incomes below the welfare line and the minimum welfare 134 line (2012) 7.4 Income tax plus employee and employer contributions less cash benefits, single persons, 100% of average earnings 135 142 8.1 Health expenditures as percentage of government expenditure 9.1 Reduction in poverty after public cash transfers according to OECD poverty definition (in %) 168 14.1 The labor force, the employed and number of hours worked, Belgium (1950–2012)233 14.2 Public and private per capita health care expenditures, in constant euros 2005 (2004–2012) 236 14.3 Maximum share of co-payments as a function of income (2002 and 2015) 238 14.4 Expenditures of the maximum billing and co-payments as a share of expenditure before and after maximum billing (2003–2013) 239 16.1 Share of older people with assessed care needs as a percentage of the population and public expenditure (selected European countries) 259 16.2 Long-term care public expenditures: health and social components (as share of GDP, 2011, or nearest year) 260 16.3 Development of 24-hour care: number of beneficiaries with public subsidies (2008–2013) 269 17.1 Persons receiving first-pillar and second-pillar benefits, 1925–2010 (in millions) 276 277 17.2 Percentage of 65+ in the whole population (1900–2010) 17.3 Distribution of health insurance premiums paid for adults over 25, by canton of affiliation (2011) 278 18.1 Absolute and per capita GRP in regions of Russia in 2012 299 300 18.2 Federal subjects of Russia by GRP per capita in 2012 18.3 Life expectancy at birth in Russian regions in 1996 and 2012 301 303 18.4 Fertility rate in Russian regions in 1996–2012 18.5 Classification of Russian regions based on GRP per capita and life 304 expectancy and fertility rate (2012) 18.6 Classification of Russian regions based on GRP per capita and life 306 expectancy and fertility rate on a map (2012) 18.7 GRP per capita in 1996–2012 (log-scale) 311 20.1 Social protection as a percentage of GDP in Israel and the OECD mean (2000–2013)335 340 20.2 Poverty levels of diverse population groups in Israel (2012) 21.1 Distribution of causes of death among children below 5 years of age (% of total causes of death), in 2000 356 21.2 Distribution of causes of death among children below 5 years of age (% of total causes of death), in 2012 356 26.1 Old-age allowance in Taiwan (2013) 440 454 27.1 Trend of welfare expenditure by types (1990–2013) 27.2 Trend of the poverty rate (1990–2013) 457 xii

Tables and figures

27.3 27.4 27.5 27.6 27.7 28.1 28.2 28.3

Trends of the Gini coefficient of income distribution in Korea (1982–2013)458 Composition of monthly household income of employees in 459 urban areas (1982–2014) Comparison of the minimum wage and minimum living cost (MLC) (1988–2015)461 Relationship of the minimum unemployment benefit, minimum wage and minimum living cost (1995–2015) 461 Relationship of the public pension and other social security benefits (1993–2013)462 International comparison of social expenditures as % of GDP in selected countries (in 1995 and 2014) 472 The development of social expenditures in Japan (% of GDP; 2000–2016) 480 Fiscal indicators for Japan (% of GDP; 2000–2016) 481

xiii

Notes on contributors

Peter Abrahamson is Associate Professor, Department of Sociology, University of Copenhagen, Denmark. His publications include Política Fiscal y Protección Social en Estados Pequeños: Comparando Escandinavia y Centroamérica (El Instituto Centroamericano de Estudios Fiscales), Welfare and Families in Europe (with B. Greve and T. Boje, Ashgate), Understanding Social Policy in Europe (with C. Aspalter, Casa Verde), “Continuity and Consensus: Governing Families in Denmark” (  Journal of European Social ), “European Welfare States beyond Neoliberalism: Toward the Social Investment State” (Development & Society), “Fiscal Policy and Social Protection in Small States: Comparing Scandinavia and Central America” (  Journal of Societal and Social Policy), “Free Trade and Social Citizenship: Prospects and Possibilities of the Central American Free Trade Agreement” (Global Social Policy), “New Boundaries for Social Citizenship: The Social Dimension of the European Union” (  Journal of Societal and Social Policy), “Reconciliation of Work and Family Life in Europe: A Case Study of Denmark, France, Germany, and the United Kingdom” (  Journal of Comparative Policy Analysis), “Family and/or Work in Europe” (with C. Wehner, Journal of Comparative Family Studies), “La Nouvelle Portée de l´Espace et du Lieu Quant a la Citoyenneté: Le Cas de l’Union Européenne” (Lien Social et Politiques), “Coping with Urban Poverty: Changing Citizenship in Europe?” (International Journal of Urban and Regional Research), “Liquid Modernity: Bauman on Contemporary Welfare Society” (Acta Sociologica), “The End of the Scandinavian Model? Welfare Reform in the Nordic Countries” (  Journal of Societal and Social Policy), “Researching Poverty and Social Exclusion in Europe” (  Journal of European Social Policy), “The Dutch and Danish Miracles Revisited: A Critical Discussion of Activation Policies in Two Small Welfare States” (with W. van Oorshot, Social Policy and Administration), “The Danish Welfare State: A Social Rights Perspective” (  Journal of Societal and Social Policy), “Indicators of Social Exclusion: Making a Distinction between Poverty and Social Exclusion” (Politica Economica), “The Welfare Modelling Business” (Social Policy and Administration), “Welfare Pluralism: Towards a New Consensus for a European Social Policy” (Current Politics and Economics of Europe), “Poverty and Welfare in Denmark” (Scandinavian Journal of Social Welfare), and “Welfare and Poverty in the Europe of the 1990s” (International Journal of Health Services). Tuba I. Agartan is Associate Professor of Health Policy and Management, Providence Col-

lege, Providence, Rhode Island. Her publications include “Devising and Implementing Health Workforce Policy in the Turkish Healthcare System” (Health Policy), “Learn, Frame, and Deploy? Cross-National Policy Ideas and Comparisons in Turkey’s Health Care Reform” (  Journal of Comparative Social Policy), “Explaining Large Scale Policy Change in the Turkish Health Care System: Ideas, Institutions and Political Actors” (  Journal of Health Policy, Politics and Law), “Social Health Insurance without Corporate Actors: Changes in Self-Regulation in Germany, Poland xiv

Notes on contributors

and Turkey” (with C. Wendt and M.-E. Kaminska, Social Science and Medicine), and “Marketization and Universalism: Crafting the Right Balance in the Turkish Health Care System” (Current Sociology). Christian Aspalter is Professor of Social Policy and Former Founding Head of the Social Work and Social Administration Program, HKBU-BNU United International College, Zhuhai, China. His publication record includes over 20 books, including Importance of Christian and Social Democratic Movements in Welfare Politics (Nova Science), Conservative Welfare State Systems in East Asia (Praeger), Discovering the Welfare State in East Asia (Praeger), Democratization and Welfare State Development in Taiwan (Ashgate), Understanding Modern Taiwan (Ashgate), Securing the Future for Old Age in Europe (with A. Walker, Casa Verde), Understanding European Social Policy (with P. Abrahamson, Casa Verde), The State of Social Welfare in Asia (with A. Aldosary, A. Dashkina and S. Singh, Casa Verde), Debating Social Development (with S. Singh, Casa Verde), Welfare Capitalism around the World (Casa Verde), The Welfare State in Emerging Market Economies (Casa Verde), Neoliberalism and the Australian Welfare State (Casa Verde), Fighting Old-Age Poverty: The Politics of Pension Reform in Germany, Italy and Sweden (National Pension Corporation, Korea), Health Care Systems in Europe and Asia (Routledge), Social Work in East Asia (Ashgate), Active Aging in Asia (with A. Walker, Routledge), Health Care Systems in Developing Countries in Asia (with R. Gauld and K. Teguh-Pribadi, forthcoming, Routledge), and Development and Social Policy: The Win-Win Strategies of Developmental Social Policy (with K. Teguh-Pribadi, Routledge). His journal articles include “Population Policy in India” (International Journal of Sociology and Social Policy), “Politics and Its Impact on Social Policy in Taiwan, Hong Kong and Mainland China” (Social Policy Review), “Development Constraints and Social Policy in India: A Political Explanation” (  Journal of Comparative Social Welfare), “New Developments in the Theory of Comparative Social Welfare” (  Journal of Comparative Social Welfare), “Freedom, Dehumanization and Social Welfare” (  Journal of Comparative Social Welfare), “The East Asian Welfare Model” (International Journal of Social Welfare), “The European Versus the American Social Dream: The Competition of Welfare Regimes” (with J. Weidenholzer, Journal of Comparative Social Welfare), “Strategies for Social Security Reform in Aging Societies” (Hallym International Journal of Aging), “The Welfare State in Cross-Cultural Perspective” (International Social Work), “Analyzing the Welfare State in Poland, Czech Republic, Hungary and Slovenia: An Ideal-Typical Perspective” (Social Policy and Administration), and “The Development of Ideal-Typical Welfare Regime Theory” (International Social Work). Jean-Michel Bonvin is Professor at the Institute of Demographics and Social Economy, University of Geneva, Switzerland. His publications include “From Inclusiveness to Selectivity: Paradoxical Outcomes of Youth Transition Policies in Switzerland” (with E. Rosenstein, Sociologia del Lavoro), “Children’s Rights as Evolving Capabilities:Towards a Processual and Contextualised Conception of Social Justice” (with D. Stoecklin, Ethical Perspectives), “Identifying and Tackling Inequality: A Challenge for Social Work” (with B. Beuret and S. Dahmen, Revue Suisse de Travail Social ), “Assessing Employee Voice in Restructuring Processes against the Capability Approach” (with E. Moachon, Management Revue), “A Capability Approach to Public Policies for Marginalized Youth” (with M. Dif-Pradalier, Revue Suisse de Travail Social ), and “Job Satisfaction in the Broader Framework of the Capability Approach” (with O. Lessmann, Management Revue). His books include Reformieren durch investieren, Chancen und Grenzen der Sozialinvestitionsstaat in der Schweiz (with S. Dahmen, Seismo), Facing Trajectories from School to Work: Towards a Capability-Friendly Youth Policy in Europe (with H.-U. Otto et al., Springer), Children’s Rights and the Capability Approach: Challenges and Prospects (with D. Stoecklin, Springer), Transforming Gendered xv

Notes on contributors

Well-Being in Europe (with A.Woodward and M. Renom, Ashgate), and Manuel de Politique Sociale (with P. Gobet, S. Rossini, J.-P. Tabin, EESP). Silvia Borzutzky is Teaching Professor of International Relations and Politics, Heinz College, Carnegie Mellon University, Pittsburgh, Pennsylvania. Her publications include The Bachelet Government: Conflict and Consensus in Post-Pinochet Chile (G. Weeks, University Press of Florida), After Pinochet: Chile’s Road to Capitalism and Democracy (with L. Hecht-Oppenheim, University Press of Florida), Vital Connections: Politics, Social Security and Inequality in Chile (Notre Dame University Press), “Reforming the Reform” (  Journal of Policy Practice), “Markets Awash: The Privatization of Chilean Water Markets” (with E. Madden, Journal of International Development), “Contradictions and Absences:The Case of Instructional Leadership in Chile” (with G. Silvestre, Pacific Rim Studies Journal ), “Women under Attack: Violence and Poverty in Guatemala” (with C. Ogrodnik, Journal of International Women’s Studies), “Dammed if You Do and Dammed if You Don’t: The Eisenhower Administration and the Aswan Dam Decision” (with D. Berger, Middle East Journal ), “Anti-Poverty Policies in Chile: A Preliminary Analysis of the Chile Solidario Program” (Poverty and Public Policy: A Global Journal of Social Security, Income Aid and Welfare), “Another Version of the Same Story: Is the 2009 Constitutional Going to Make a Difference” (with B. Zwart, Latin Americanist), “The Politics of Impunity” (Latin American Research Review), “NATO and Terrorism” (with R. Axelrod, Review of International Organizations), “The Evolution of the Polish Agricultural Sector: From Communist Rule to EU Accession” (with E. Kranidis, East European Politics and Society), and “From Chicago to Santiago: Neoliberalism and Social Security Privatization in Chile” (Governance). Bea Cantillon was Senator in Belgium for the Christian People’s Party and is currently Professor of Social Policy and Director of the Herman Deleeck Centre for Social Policy at the University of Antwerp, Belgium. Her publications include Reconciling Work and Poverty Reduction: How Successful Are European Welfare States? (Oxford University Press), “Métiers Pénibles, Pension à Temps Partiel et Flexibilité Équitable dans le Système de Pension: Avis Complémentaire de la Commission de Reforme des Pensions 2020–2040” (with F. Vadenbroucke, J. Boulet, P. Devolder, R. Janvier, et al., SPF Sécurité Sociale), “Menschenwürdige Mindesteinkommen von Armut betroffener Haushalte: Eine Aufgabe für die EU?” (with S. Marchal and C. Luigjes, WSI Mitteilungen), “The Impact of Child Benefits on Single Mother Poverty: Exploring the Role of Targeting in 15 European Countries” (with W. Van Lancker and J. Ghysels, International Journal of Social Welfare), “Bipolar Federalism and the Social Welfare State: A Case for Shared Competences” (with P. Popelier, Publius: The Journal of Federalism), “Lutte Contre la Pauvreté et Sécurité Sociale: Fissures dans un Paradigme Politique” (with N. Van Mechelen, Revue Belge de Sécurité Sociale), “The Social Stratification of Social Risks: The Relevance of Class for Social Investment Strategies” (with O. Pintelon and K. Van den Bosch, and C. Whelan, Journal of European Social Policy), and “Three Shortcomings of the Social Investment Perspectives” (with W.Van Lancker, Social Policy and Society). Tom Chevalier is currently Researcher at the Centre d’Etudes Européennes of Sciences Po (Paris) and temporary Lecturer at the University Paris II: Panthéon-Sorbonne, Paris. His publications include L’Etat-Providence et les Jeunes (L’Harmattan), “Citoyennetés Socioéconomiques des Jeunes et Stratégies de Croissance: Suède, Allemagne, Royaume-Uni, France” (Revue Française des Affaires Sociales), “Varieties of Youth Welfare Citizenship: Towards a Two-Dimension Typology” (  Journal of European Social Policy), and “Jeunesse et Familialisme en France et en Allemagne” (Agora Débats/Jeunesses). xvi

Notes on contributors

Stephan Dahmen is Lecturer at the Department of Social Work at the Bielefeld University, Germany. His publications include “The Capability Approach and Sociological Conceptions of Human Agency: An Empirical Assessment on the Basis of an Analysis of Activation Policies” (Social Work and Society), “Identifying and Tackling Inequality: A Challenge for Social Work” (with B. Beuret and J.-M. Bonvin, Schweizerische Zeitschrift für Soziale Arbeit/Revue Suisse de Travail Social ), “When Ideas Circulate: A Walk across Disciplines and Different Uses of the ‘Capability Approach’ ” (with M. Bussi, Transfer: European Review of Labour and Research), and “Evidenzbasierte Soziale Arbeit: Zur Rolle Wissenschaftlichen Wissens für Sozialarbeiterisches Handeln” (Edition: Soziale Arbeit Aktuell ). Diana De Graeve is Professor at the Department of Economics and the Herman Deleeck

Centre for Social Policy at the University of Antwerp, Belgium. Her publications include “Predicting the Place of Out-of-Hours Care – A Market Simulation Based on Discrete Choice Analysis” (with H. Philips, D. Marh, R. Remmen, M. Weverbergh, and P. Van Royen, Health Policy), “Supplemental Health Insurance and Equality of Access in Belgium” (with E. Schokkaert, R. Van Ourti, A. Lecluyse, C. Van de Voorde, Health Economics), “Hospital Supplements in Belgium: Price Variation and Regulation” (with A. Lecluyse, C. Van de Voorde, E. Schokkaert and T. Van Ourti, Health Policy), “Comparing the Cost Effectiveness of Risperidone and Olanzapine in the Treatment of Schizophrenia Using the Net-Benefit Regression Approach” (with A. De Ridder, PharmacoEconomics), “Order Bias in Estimates of Willingness to Pay for Drugs to Treat Attention-Deficit/Hyperactivity Disorder” (with A. De Ridder, European Journal of Health Economics), “Economic Aspects of Pneumococcal Pneumonia: A Review of the Literature” (with P. Beutels, PharmacoEconomics), “The Distributional Impact of Health Financing in Europe: A Review” (with T. Van Ourti, World Economy), “A Typology for Provider Payment Systems in Health Care” (with M. Jegers, K. Kesteloot, W. Gilles, Health Policy), and “Patient Classification and Cost Analysis of Aids and HIV: The Case of Belgium” (with B. Lescrauwaet and W. Nonneman, Health Policy). Jörg Michael Dostal is Associate Professor in the Graduate School of Public Administration, Seoul National University, Korea. His research interests include comparative politics, comparative public policy, and comparative social policy. His publications include “The Pegida Movement and German Political Culture: Is Right-Wing Populism Here to Stay?” (Political Quarterly), “Die Bundestagswahl 2013: Demokratische Beteiligungslücke und Dauerkrise der SPD” (  Journal of the Korean-German Association for Social Sciences), “Voluntary Pension Saving for Old Age: Are the Objectives of Self-Responsibility and Security Compatible?” (with B. H. Casey, Social Policy and Administration), “Explaining the Crisis and Electoral Decline of the German Social Democratic Party (SPD) in the Era of Welfare State Retrenchment” (  Journal of the Korean-German Association for Social Sciences), “The German Political Economy between Deregulation and ReRegulation: Party Discourses on Minimum Wage Policies” (Korean Journal of Policy Studies), “The Developmental Welfare State and Social Policy: Shifting from Basic to Universal Social Protection” (Korean Journal of Policy Studies), “Nigerian Pension Reform 2004–2010: Great Leap or Inappropriate Policy Design?” (Korean Journal of Policy Studies), “Pension Reform in Nigeria: How Not to ‘Learn’ from Others” (with B. H. Casey, Global Social Policy), “The Workfare Illusion: Re-Examining the Concept and the British Case” (Social Policy and Administration), “Campaigning on Expertise: How the OECD Framed EU Employment and Labour Market Policies – and Why Success Could Trigger Failure” (  Journal of European Public Policy), and “From ‘Moderniser’ to ‘Traditionalist’: Oskar Lafontaine and German Social Democracy in the 1990s” (Debatte: Review of Contemporary German Affairs). xvii

Notes on contributors

Adem Yavuz Elveren is Assistant Professor, Department of Economics, History and Political

Science, Fitchburg State University, Massachusetts. His publications include “The Effect of Informal Economy on Income Inequality: Evidence from Turkey” (with G. Özgür, Panoeconomicus), “The Impact of Military Spending and Income Inequality on Economic Growth in Turkey” (with U. Tongur, Defence and Peace Economics), “A Minimum Pension Guarantee Application for Turkey: A Gendered Perspective” (with S¸. Sahin, Journal of Women, Politics & Policy), “Women’s Labour Force Participation and Pay Inequality: Evidence from Panel Cointegration” (Applied Economics Letters), “Deunionization and Pay Inequality in OECD Countries: A Panel Granger Causality Approach” (with U. Tongur, Economic Modelling), “Does Income Inequality Derive Separatist Terrorism in Turkey?” (with P. Derin-Güre, Defence and Peace Economics), “Military Expenditures, Income Inequality, and Welfare and Political Regimes: A Dynamic Panel Data Analysis” (with U. Tongur, Defence and Peace Economics), “A Critical Analysis of the Pension System in Turkey from a Gender Equality Perspective” (Women’s Studies International Forum), and “Military Spending and Income Inequality: Evidence on Cointegration and Causality for Turkey” (Defence and Peace Economics). John Gal is Professor at the Paul Baerwald School of Social Work and Social Welfare, Hebrew University of Jerusalem, Israel. His publications include Formulating Social Policy in Israel: Trends and Issues (with U. Aviram and Y. Katan, Taub Center for Social Policy Studies in Israel), Access to Social Justice in Israel (with M. Ajzenstadt, Taub Center for Social Policy Studies in Israel), Children, Families and Gender in Mediterranean Welfare States (with M. Ajzenstadt, Springer), PolicyPractice in Social Work (with I. Weiss-Gal, Magnes), Social Workers Affecting Social Policy: Policy Practice in an International Perspective (with I.Weiss-Gal, Policy Press), “Child and Family Outcomes in New York and Tel Aviv: Using Social Indicators in a City Level Comparative Analysis” (with A. Ben-Arieh, L. Nepomnyaschy and I. Garfinkel, Social Indicators Research), “The Puzzling WarfareWelfare Nexus” (War and Society), “Social Workers and Policy Practice: The Role of Social and Professional Values” (with I. Weiss-Gal, Journal of Social Service Research), “Poverty in the Eyes of the Beholder: Social Workers Compared to Other Middle Class Professionals” (with I. Weiss, British Journal of Social Work), “Social Welfare Policy: Preferences of Arab and Jewish Social Workers in Israel” (with I. Weiss, Families in Society), “Immigration and the Categorical Welfare State in Israel” (Social Service Review), “Realizing Rights in Social Work” (with I. Weiss-Gal, Social Service Review), “Social Workers’ Attitudes towards Social Welfare Policy” (with I. Weiss, International Journal of Social Welfare), “A Universal Basic Income: Income and Practice in the Israeli Case” (with M. Malul and M. Greenstein, Basic Income Studies), “Is There an Extended Family of Mediterranean Welfare States?” (  Journal of European Social Policy), “The Long Path from a Soup Kitchen to a Welfare State in Israel” (with M. Ajzenstadt, Journal of Policy History), “The Development of Social Policy Research in Israel” (with R. Holler, Israel Affairs), and “Social Workers as Policy Actors” (with I. Weiss-Gal, Journal of Social Policy). Christina Hießl is Visiting Professor, Department of Social Welfare, Yonsei University, Seoul,

Korea. Her research interests include European labor law and social law, as well as social policy in Europe and Korea. Her publications include her recent book Grundzüge des Europäischen Arbeits- und Sozialrechts (Linde Verlag). Karl Hinrichs is Professor at the Centre for Social Policy, University of Bremen, Germany. His

publications include Labour Market Flexibility and Pension Reforms: Flexible Today, Secure Tomorrow? (with M. Jessoula, Palgrave Macmillan), “Old Age and Pensions” in B. Greve (ed.), The Routledge Handbook of the Welfare State (Routledge), “Demographic Trends and Pension Systems: Is xviii

Notes on contributors

Increasing Retirement Age the Promising Solution?” in J. Garcés and I. Monsonís Payá (eds.), Sustainability and Transformation in European Social Policy (Peter Lang), “Die Finanzkrise und ihre Auswirkungen auf Sozialstaaten und Arbeitsbeziehungen” (with C. Hermann and M. Brosig) in U. Filipic and E. Beer (eds.), Sozialer Aderlass in Europa: Arbeit und soziale Sicherung unter Druck (Arbeiterkammer), “Die Altersversorgung von Abgeordneten in Deutschland. Entscheidungen in eigener Sache” (with L. Hoffmann, Zeitschrift für Sozialreform), “When Is a Change Big Enough to Be a System Shift? Small System-Shifting Changes in German and Finnish Pension Policies” (with O. Kangas, Social Policy & Administration), “Do the Old Exploit the Young? If So, Is Enfranchising Children a Good Idea?” (Archives Européennes de Sociologie), “Health Care Policy in the German Social Insurance State: From Solidarity to Privatization?” (Review of Policy Research), “What Can Be Learned from Whom? Germany’s Employment Problem in Comparative Perspective” (Innovation.The European Journal of Social Science Research), “Elephants on the Move: Patterns of Public Pension Reform in OECD Countries” (European Review), and “The Long Road to Long-Term Care Insurance in Germany” (with U. Götting and K. Haug, Journal of Public Policy). Mark Hyde is Associate Professor in Work and Pensions, Plymouth School of Government, Plymouth University, UK. His publications include Comparing How Various Nations Administer Retirement Income (with J. Dixon, Edwin Mellen Press), The Privatization of Mandatory Retirement Income Protection (with J. Dixon and G. Drover, Edwin Mellen Press), The Marketisation of Social Security (with J. Dixon, Greenwood), “The Privatisation of Pensions” (with J. Moizer and S. Farrar, Journal of Comparative Social Welfare), “The ‘Social’ in Social Security: Welfare Pluralism in International Perspective” (with J. Dixon, Journal of Comparative Social Welfare), “The Marketization of Social Security” (with J. Dixon, Review of Policy Research),“Rent-Seeking as Social Policy: A UK Case Study” (with N. Johns and A. Barton, Journal of Social Research & Policy), “The Value of Incentives to Defer the UK State Pension” (with S. Farrar and J. Moizer, Pensions: An International Journal ), “Should Europeans Fear the Privatisation of Pensions?” (with J. Moizer and S. Farrar, Journal of Comparative Social Welfare), “A Just Retirement Pension System: Beyond Neoliberalism” (with J. Dixon, Public Policy & Poverty), “Individual and Collective Responsibility: Mandated Private Pensions in Comparative Perspective” (with J. Dixon, Journal of Comparative Social Welfare), “A Comparative Analysis of Mandated Private Pension Arrangements” (with J. Dixon, International Journal of Social Economics), “Can Private Pensions Be Trusted? A Cross-National Review” (with J. Dixon, International Journal of Social Economics), “Assessing the Capacity of Pension Institutions to Promote Distributive Justice” (with J. Dixon, Open Social Science Journal ), “Brij Mohan’s Social Policy Analysis: A View from Western Europe” (with N. Johns, Journal of Comparative Social Welfare), “Diversity or Solidarity? Making Sense of the ‘New’ Social Democracy” (with N. Johns and A. Barton, Diversity), “Eveline M. Burns: A Tribute” (with J. Dixon, Journal of Comparative Social Welfare), “Assessing the Capacity of Pension Institutions to Build and Sustain Trust: A Multidimensional Conceptual Framework” (with J. Dixon and G. Drover, Journal of Social Policy), “Working and Saving for Retirement: New Labour’s Reform of Company Pensions” (with J. Dixon, Critical Social Policy), “Public Pension Privatization: Neoclassical Economics, Decision Risks and Welfare Ideology” (with J. Dixon, International Journal of Social Economics), “Welfare Retrenchment or Collective Responsibility? The Privatisation of Public Pensions in Western Europe” (with J. Dixon, Social Policy and Society), “Globalization, Poverty, Ideology and the Privatization of Social Protection in Western Europe: Welfare Retrenchment or Social Citizenship?” (with J. Dixon, Journal of Comparative Social Welfare), “A  Comparative Perspective on Social Security for Disabled People” (with J. Dixon, Disability & Society), “From Welfare to Work? Social Policy for Disabled People of Working Age in the UK in the 1990s” xix

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(with J. Dixon, Disability & Society), and “Working Class Opinion and Welfare Strategies: Beyond the State and the Market” (with B. Deacon, Critical Social Policy). Bruce Josephson is an anthropologist and social worker by trade. His former experience

includes research on Mormon religion, extended ethnographic field research in Africa, and various teaching appointments in Oman, South Korea and China. His publications include The LDS Worldview: A New Interpretation of Christianity (University Press of America), articles on Ethnology, Human Life-Cycle, Mores and Social Anthropology in the Encyclopedia of Anthropology (Sage), and articles on Africa, Traditional Play; Homo Ludens: Play and Power; Psychology of Play; Play and Power, Sociology of Play; Rhetorics of Play – Brian Sutton-Smith; Speech Play; and Symbol Formation of Play in the Encyclopedia of Play (Sage). Markus Kainu is Researcher at the Research Department of the Social Insurance Institution

of Finland (KELA), in Helsinki, Finland. He has served before as a consultant for the Food and Agricultural Organization (FAO) of the United Nations, the Local Government Pensions Institution in Finland, and Statistics Finland. He is a quantitatively oriented social scientist specializing in poverty and inequalities in post-socialist societies. His publications include “Stratification and Sustainability in Different Worlds of Welfare: Welfare State Entry and Exit over the Life Course” (with O. Kangas and J. Palme, European Societies), and “Paradoxes of Agency: Democracy and Welfare in Russia” (with M. Kulmala, J. Nikula and M. Kivinen, Demokratizatsiya). Jinsoo Kim is Professor of Social Policy, Department of Social Welfare, Yonsei University, Seoul, Korea. His publications include Industrial Welfare (Nanam), Income Security for the Elderly in the Western Industrialized Countries (Korean Institute of Gerontology), Annual Report of Social Welfare in Korea 2000 (Upung), Income Distribution and Social Welfare (Yegang), Issues and Challenges in Social Welfare of Korea (Upung), Social Welfare Policy for the 21st Century (Chungmok), Social Welfare of Korea 2002–2003 (Upung), The Third Way and Welfare Reform (Gyeongsang University Press), Social Security (Chungmok), Social Welfare of Korea 2004–2005 (Upung), Social Welfare of Korea 2006–2007 (Upung), A Study of Ways to Fill Gap in the Coverage of Social Insurance (Korean Institute of Health and Social Affairs), A Study on National Strategy to Address Social Polarization (Presidential Commission on Policy Planning), A Study on Institutional Improvement on Government Employee Pension (Korea Development Institute), A Study on the Rationalization of Benefits Arrangement Overlapped Between the Industrial Accident Compensation Insurance and the National Pension Scheme (Ministry of Labor of Korea), “Recent Social Change and Social Policy in Korea” in C. Aspalter, A. Dashkina, A. S. Aldosary, and S. Singh (eds.), The State of Social Welfare in Asia (Casa Verde), “European Welfare States in Transition: Poland, the Czech Republic and Hungary” (with S. Park) in P. Abrahamson and C. Aspalter (eds.), Understanding European Social Policy (Casa Verde), “Aging and the Welfare State in Switzerland” in A.Walker and C. Aspalter (eds.), Securing the Future for Old Age in Europe (Casa Verde), “Recent Social Change and Social Policy in Korea” (  Journal of Societal and Social Policy), and “The Welfare States in Poland, Czech Republic, Hungary and Slovenia: An Ideal-Typical Perspective” (with C. Aspalter and S. Park, Social Policy and Administration). Markku Kivinen is Professor and Director of the Finnish Centre of Excellence in Russian Stud-

ies, University of Helsinki, Finland. His publications include “Russian Modernisation: A New Paradigm” (with T. Cox, Europe-Asia Studies), “Paradoxes of Agency: Democracy and Welfare in Russia” (with M. Kainu, M. Kulmala, and J. Nikula, Demokratizatsiya),“Russia’s Energy Relations in the East and West: Towards a Social Structurationist Approach to Energy Policy Formation?” (with P. Aalto, D. Dusseault and M. Kennedy, Journal of International Relations and Development), xx

Notes on contributors

“Russia: Presidential Elections and the Legitimacy of Power” (Baltic Worlds), “Globalization and Russia” (Iranian Journal of International Affairs), “Russian Class Structure in Formation” (Vietnamese Journal of Sociology), “The Economic System and Work Situation: A Comparison of Finland and Estonia” (with R. Blom, H. Melin and E. Rannik, International Sociology), Progress and Chaos: Russia as a Challenge for Sociological Imagination (Kikimora), The Kalamari Union: Middle Class East and West (Ashgate), and The Scope Logic Approach to Class Analysis (with R. Blom, H. Melin and L. Rantalaiho, Avebury). Yeun-Wen Ku is Professor at Department of Social Work, National Taiwan University. He was

one of the founders of the Taiwanese Association of Social Policy (TASP) and its president during 2009–2014. He was also one of key members in founding the East Asian Social Policy (EASP) research network, established in January 2005 to facilitate research exchange and co-operation among East Asian social policy analysts; he was chair of the EASP during 2011–2012. He is currently president of the Taiwan Association of Social Work Education. He has written widely on welfare development and policy debates in Taiwan, extending to comparative study on East Asian welfare. He has published 10 books and over 80 papers, both in English and in Chinese. His English publications include Welfare Capitalism in Taiwan (Macmillan), Welfare Capitalism in East Asia (Palgrave), Social Cohesion in Greater China: Challenges for Social Policy and Governance (World Scientific), “East Asian Welfare Regimes” (Social Policy and Administration), “Development of East Asian Welfare Studies” (Social Policy and Administration), “East Asian Welfare Regimes: Testing the Hypothesis of the Developmental Welfare State” (with Y. J. Lee, Social Policy and Administration), “Effectiveness and Social Welfare Programs in East Asia: A Case Study of Taiwan” (with C. C. Huang, Social Policy and Administration),“Resource Allocation in Families with Children in Taiwan: Do Poverty and Family Structure Make Differences?” (with C. C. Huang, Journal of Poverty), and “After Massification:The Quest for Entrepreneurial Universities and Technological Advancement in Taiwan” (with K. H. Mok and K. M. Hua, Journal of Higher Education Policy and Management). Meri Kulmala is a postdoctoral researcher the Finnish Centre of Excellence in Russian Studies, University of Helsinki, Finland. Her expertise covers civil society, the welfare state, social policy, family policy, child welfare and methodology, especially ethnography and qualitative case studies. Her publications include “Interest Representation and Social Policy Making: Russian Veterans’ Organizations as Brokers between the State and Society” (with A. Tarasenko, Europe-Asia Studies), “Street-Level Practice of Russia’s Social Policy Making in Saint Petersburg: Federalism, Informal Politics, and Domestic Violence” (with J. E. Johnson and M. Jäppinen, Journal of Social Policy), and Gazing at Welfare, Gender and Agency in Post-Socialist Countries (with M. Jäppinen and A. Saarinen, Cambridge Scholars). Carmel K. M. Lee is Assistant Professor at the Social Work and Social Administration Program,

Beijing Normal University-Hong Kong Baptist University United International College, Zhuhai, China. His research interest includes social policy and social work, in particular services for older people in Mainland China and Hong Kong. His research studies include research works on behalf of the Zhuhai municipal government in China, as well as the Development Bureau, the Planning Department, the Social Welfare Department, the Home Affairs Bureau, the Health, Welfare and Food Bureau, the Commission on Poverty and the Urban Renewal Authority of the Hong Kong government. Yih-Jiunn Lee is Professor at Department of Social Work, National Quemoy University. He was

one of the founders of the Taiwanese Association of Community Work and Studies (TACWS) xxi

Notes on contributors

and the secretary-general since 2008. He is the executive editor of the Journal of Community Work and Studies. He has written widely on welfare development and policy debates in Taiwan, as well as on East Asian welfare state comparison. He has published three books and over 50 papers, both in English and in Chinese. His research interests span from social policy and welfare regimes to community care and the practice of social community work. Kai Leichsenring is Executive Director of the European Centre for Social Welfare Policy and Research,Vienna. He studied political science (social policy) at the University of Vienna and specialized in comparative and applied social research and policy consultancy with a focus on health and social care services, long-term care for older people and related issues such as governance and financing, quality management, user involvement and informal care. Apart from coordinating many national and European research and development projects, he collaborated with a number of international agencies and organizations (e.g. OECD,WHO and the World Bank). His publications include “Regulating Migrants as a Low-Cost Solution: The Formalisation of a Dual Care Labour Market in Austria” (with J.Winkelmann and A. Schmidt) in N. Morel and C. Carbonnier (eds.), At Your Service? The Political Economy of Household Services in Europe (Palgrave Macmillan), “The Public Gets What the Public Wants: Experiences of Public Reporting in Long-Term Care in Europe” (with R. Rodrigues, L. Trigg and A. E. Schmidt, Health Policy), “Performance Measurement in Long-Term Care in Austria” (with F. Lamontagne-Godwin, A. Schmidt, R. Rodrigues and G. Ruppe), in V. Mor,T. Leone and A. Maresso (eds.), Regulating Long-Term Care Quality: An International Comparison (Cambridge University Press), Long-Term Care in Europe: Improving Policy and Practice (with J. Billings and H. Nies, Palgrave Macmillan), and “Integrated Care for Older People in Europe: Latest Trends and Perceptions” (International Journal of Integrated Care). Joe C. B. Leung is Honorary Professor, Department of Social Work and Social Administration,

University of Hong Kong. His research and publications focus on government social program evaluation, social policy reforms both in Hong Kong and in Mainland China. His publications include China’s Social Welfare:The Third Turning Point (with Y. Xu, Polity Press),“Applying Resource Utilization Groups (RUG-III) in Hong Kong Nursing Homes” (with K. L. Chou and I. Chi, Canadian Journal on Aging), “Disability Trends in Hong Kong Community-Dwelling Chinese Older Adults: 1996, 2000, and 2004” (with K. L. Chou, Journal of Aging and Health), “An International Definition of Social Work for China” (International Journal of Social Welfare),“The Emergence of Social Assistance in China” (International Journal of Social Welfare), “Social Security Development in Hong Kong: Problems and Issues” (Social Development Issues), “Strengthening Families:The ReStructuring of Family Services in Hong Kong” (  Journal of Societal and Social Policy), “Social Security Reforms in China: Issues and Prospects” (International Journal of Social Welfare), “The Advent of Managerialism in Social Welfare:The Case of Hong Kong Community-Based Service for the Frail Elderly in China” (with Y. C. Wong, International Social Work), “Enforcing Family Care Obligations for the Elderly in China Through Medication” (with D. Lam, Asia Pacific Journal of Social Work), “The Political Economy of Unemployment and Unemployment Insurance in the PRC” (International Social Work), “Dismantling the ‘Iron Rice Bowl’: Welfare Reforms in the People’s Republic of China” (  Journal of Social Policy), “The Emergence of Non-Governmental Welfare Organisations in China: Problems and Issues” (Asian Journal of Public Administration), and “The Development of Social Work Education in China: Issues and Prospects” (Asia Pacific Journal of Social Work). Hubert Liu is Assistant Professor at the Department of Gerontological Care and Management,

Chang Gung University, Puzi,Taiwan. He holds a PhD from Kobe University in Japan. His publications include “Social Work in Japan” in C. Aspalter (ed.), Social Work in East Asia (Ashgate), xxii

Notes on contributors

“Financing the Welfare State System in Taiwan” in C. Aspalter (ed.), Financing Welfare State Systems in Asia (forthcoming), and “Taiwan” in C. Aspalter (ed.), The East Asian Welfare State Model (forthcoming). Gabriel Martinez is Director of the Masters of Public Policy, Instituto Tecnologico Autonomo de Mexico, Mexico. His book publications include Desregulación Económica (with G. Fárber, Fondo de Cultura Económica), Pobreza y Política Social (Fondo de Cultura Económica), Aportaciones al Debate (Instituto Mexicano del Seguro Social), Evidencias para el Debate (Instituto Mexicano del Seguro Social), Perspectivas para el Debate (Instituto Mexicano del Seguro Social), and El Estado Mexicano de Bienestar (Miguel Ángel Porrúa). His journal articles include “Antecedentes Económicos para una Ley Federal de Competencia Económica” (with G. Castañeda, S. Levy and G. Merino, El Trimestre Económico), “What Happens to Wages after Displacement?” (with D. S. Kaplan and R. Robertson, Economía), “The Value of Longevity in Mexico” (with N. Aguilera, Economía Mexicana Nueva Época), “Seguridad Social Centrada en el Ciudadano” (with N. Aguilera and M. Miranda, Bienestar y Política Social ), “Programas de Pensiones, Empleo y Familia” (with M. Miranda and N. Aguilera, Bienestar y Política Social ), “Seguro Social de Salud” (with N. Aguilera and M. Miranda, Bienestar y Política Social ), “Citizen-Centered Universal Social Security” (with N. Aguilera and M. Miranda, Well-Being and Social Policy), “Pensions, Employment and Family Programs” (with M. Miranda and N. Aguilera, Well-Being and Social Policy), and “Social Health Insurance” (with N. Aguilera and M. Miranda, Well-Being and Social Policy). Philip Mendes is Associate Professor and the Director of the Social Inclusion and Social Policy Research Unit in the Department of Social Work at Monash University, Australia. He has published widely on a range of social policy and community development debates including young people transitioning from out-of-home care, globalization and the welfare state, compulsory income management, illicit drug policies, indigenous social policy and social workers and policy practice. He has published 10 books including Inside the Welfare Lobby: A History of the Australian Council of Social Service (Sussex Academic Press), Harm Minimisation, Zero Tolerance and Beyond: The Politics of Illicit Drugs in Australia (with J. Rowe, Pearson Education), Young People Transitioning from Out-of-Home Care: International Research, Policy and Practice (with P. Snow, Palgrave Macmillan), and a third edition of Australia’s Welfare Wars (Newsouth Books). Carmelo Mesa-Lago is a world leading expert on Cuba and social security systems in Latin

America. His decades of experience includes consultantships to the ILO, ECLAC, UNDP, WHO/PAHO, UNCTAD, UNRISD, ILO, ISSA, the World Bank, the Interamerican Development Bank, USAID, the US presidency, the US State Department, and the US Department of Labor. He has published well over a hundred books and many more articles, including Cuba under Raul Castro: Assessing the Reforms (with J. Pérez-López, Lynne Rienner), Reassembling Social Security: A Survey of Pension and Healthcare Reforms in Latin America (Oxford University Press), Market, Socialist and Mixed Economies: Comparative Policies and Performance: Chile, Cuba and Costa Rica (  Johns Hopkins University Press), Cuba after the Cold War (University of Pittsburgh Press), Social Security in Latin America: Pressure Groups, Stratification and Inequality (University of Pittsburgh Press), Revolutionary Change in Cuba (University of Pittsburgh Press), Social Security in Cuba (with R. Hernandez, University of Miami Press), Planificación de la Seguridad Social: Análisis Especial de la Problemática Cubana (Editorial Librería Martí), “Pension Reforms in Chile and Social Security Principles” (with F. Bertranou, International Social Security Review), “The Extension of Healthcare Coverage and Protection in Relation with the Labour Force: Problems and Policies in Latin America” (International Social Security Review), “The Structural Pension Reform xxiii

Notes on contributors

in Chile: Effects, Comparisons with Other Latin American Reforms and Lessons” (with A. Arenas de Mesa, Oxford Review of Economic Policy), “Assessing the World Bank Report ‘Keeping the Promise’ ” (International Social Security Review), “Myth and Reality on Social Security Pension Reform: The Latin American Evidence” (World Development), “The Politics of Pension Reform in Latin America” (with K. Müller, Journal of Latin American Studies), “Assessing Economic and Social Performance in the Cuban Transition of the 1990s” (World Development), “Social Welfare Reform in the Context of Economic-Political Liberalization: Latin American Cases” (World Development), “Social Insurance: The Experience of Three Countries in the English-Speaking Caribbean” (International Labour Review), “Comparative Study of the Development of Social Security in Latin America” (International Social Security Review), “The Endless Cuban Economy Saga: A Terminal Rebuttal” (with J. Pérez-López, Comparative Economic Studies), “Health Care in Costa Rica: Boom and Crisis” (Social Science and Medicine), “Social Security and Extreme Poverty in Latin America” (  Journal of Development Economics), “Building Socialism in Cuba: Romantic Versus Realistic Approach” (Latin American Perspectives), “Conversion of the Cuban Economy to Soviet Orthodoxy” (  Journal of Economic Issues), and “The Sovietization of the Cuban Revolution: Its Consequences for the Western Hemisphere” (World Affairs). Gemati Ekacita Naskoshi is a Masters candidate in the Graduate School of Public Administra-

tion, Seoul National University, Korea. Her research interests include Universal Social Welfare and Education and, in particular, Global Citizenship Education. Jouko Nikula is Senior Researcher, Finnish Centre for Russian and East European Studies, University of Helsinki, Finland. His publications include “Paradoxes of Agency: Democracy and Welfare in Russia” (with M. Kainu, M. Kulmala and M. Kivinen, Demokratizatsiya), “From Social Innovation to Innovation System: LEADER in European and Russian Rural Areas” (with I. Kopoteva, Universe of Russia), and “Decollectivisation, Destruction, and Disillusionment: A Community Study in Southern Estonia” (with K. Schwartz, I. Alanen, H. Poder and R. Ruutso, Contemporary Sociology). Bruno Palier is CNRS Research Director, Centre for European Studies at Sciences Po, Paris, France. He is co-director of LIEPP, Laboratory for Interdisciplinary Evaluation of Public Policies. He has published numerous articles on welfare reforms in France and in Europe in Global Social Policy, Governance, Journal of European Social Policy, New Political Economy, Politics and Society, Socio-Economic Review, West European Politics, Social Policy and Administration, Social Politics. He co-edited a special issue of Social Policy and Administration in 2006 on “Comparing Welfare Reforms in Continental Europe,” in 2006, and edited A Long Good Bye to Bismarck? The Politics of Welfare Reforms in Continental Europe (Amsterdam University Press), Changing France (with P. Culpepper and P. Hall, Palgrave); La Réforme des Systèmes de Santé (PUF), La Réforme des Retraites (PUF), Gouverner la Sécurité Sociale (PUF), Globalization and European Welfare States: Challenges and Changes (with R. Sykes and P. Prior, Palgrave), The Age of Dualization: The Changing Face of Inequality in Deindustrializing Societies (with P. Emmenegger, S. Häusermann and M. SeeleibKaiser, Oxford University Press), and Towards a Social Investment Welfare State? Ideas, Policies and Challenges (with N. Morel and J. Palme, Policy Press). Joakim Palme is Professor of Political Science, Department of Government, Uppsala Univer-

sity, Uppsala, Sweden, and former Director of the Institute for Futures Studies and Chairman of the Swedish Welfare Commission. His publications include “Social Transfers and Poverty in Middle- and High-Income Countries: A Global Perspective” (with F. Ferrarini and K. Nelson, xxiv

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Global Social Policy), “Rethinking Child Policy Post-UN Convention on the Rights of the Child:Vulnerable Children’s Welfare in Sweden” (with M. Heimer, Journal of Social Policy), “The Universal Decline of Universality? Social Policy Change in Canada, Denmark, Sweden, and the United Kingdom” (with D. Béland, P. Blomqvist, J. Goul Andersen and A. Waddan, Social Policy and Administration), “Social Citizenship Rights and Social Insurance Replacement Rate Validity: Pitfalls and Possibilities” (with F. Ferrarini, K. Nelson and W. Korpi, Journal of European Public Policy), Unemployment Benefits in EU Member States (with I. Esser, T. Ferrarini, K. Nelson and O. Sjöberg, DG Employment, Social Affairs and Inclusion, European Commission), Towards a Social Investment Welfare State? Ideas Policies and Challenges (with N. Morel and B. Palier, Policy Press), “The Role of Welfare State Principles and Generosity in Social Policy Programmes for Public Health: An International Comparative Study” (with O. Lundber, M. Åberg Yngwe, M. Kölegård Stjärne, J. Elstad, T. Ferrarini, O. Kangas, T. Norström and J. Fritzell, Lancet), “Welfare States and Inequality: Institutional Designs and Distributive Outcomes” (Research in Social Stratification and Mobility), “Generations at War or Sustainable Social Policy?” (with T. Lindh and B. Malmberg, Journal of Political Philosophy), “New Politics and Class Politics in the Context of Austerity and Globalization: Welfare State Regress in 18 Countries 1975–1995” (with W. Korpi, American Political Science Review), “Does Social Policy Matter? Poverty Cycles in the OECD Countries” (with O. Kangas, International Journal of Health Services), “The Paradox of Redistribution and Strategies of Equality: Welfare State Institutions, Inequality and Poverty in the Western Countries” (with W. Korpi, American Sociological Review), and “Financing the Welfare State and the Politics of Taxation” (with N. Morel), in B. Greve (ed.), Routledge Handbook of the Welfare State. Jason L. Powell is Professor at the Department of Social and Political Science, University of

Chester. His list of publications in diverse professional and academic fields includes hundreds of books and journal publications such as New Perspectives on China and Aging (with I. G. Cook, Aldine de Gruyter), The Welfare State in Post-Industrial Society (with J. Hendricks, Springer), Risk and Social Welfare (with A. Wahidin, Nova Science), Social Welfare, Personal Budgets and Care (Nova Science), International Perspectives on Social Policy, Administration, and Practice (with S. Chen, Springer), International Aging (with S. Chen, Springer), Exploring Policing, Crime and Society (Nova Science), Understanding the Voluntary Sector: Critical Success Factors – A Case Study (Nova Science), Aging, Gender and Crime (Nova Science), Feminism (Nova Science), Global Perspectives on Power and Resistance in Health and Social Care (with T. Gilbert, Springer), Foucault: Issues and Legacy (Nova Science), Understanding Power and Emotion (Nova Science), Trust and Risk (Nova Science), Social Gerontology (Nova Science), Later Life (Nova Science), Symbolic Interactionism (Nova Science), Issues in Crime, Criminal Justice and Aging (Nova Science), Neoliberalism and the Power of Globalization (Nova Science), Theorizing Community Care: From Disciplinary Power to Governmentality to Personal Care (Nova Science), The “Management of Aging” and the Dark Side of Modernity (Nova Science), “Surveillance and Elder Abuse:The Rationalities and Technologies of Community Care” (  Journal of Contemporary Health), “Participatory Action Research: Towards a Radical Methodology of Mental Health” (  Journal of Social Sciences and Humanities), “Foucauldian Gerontology: A Methodology for Researching Aging” (  Journal of Sociology), “Corporate Crime, Aging and Pensions in Great Britain” (with A. Wahidin, Journal of Societal and Social Policy), “Aging and Social Policy in Great Britain” (  Journal of Societal and Social Policy), “Reforms, Rights or Wrongs? A Foucauldian Exploration on New Mental Health Bill in UK” (International Journal of Sociology and Social Policy), “Old Age,Vulnerability and Sexual Violence: Implications for Knowledge and Practice” (International Nursing Review), “Unpacking Performativity: A Case Study of Patriarchy and the Elderly in China” (International Journal of Sociology and Social Policy), “China and Political Narratives of Aging” (Asian Journal of Social Policy), “From ‘Trust Society’ to the ‘Risk Society’? xxv

Notes on contributors

The Case of Aging and Welfare in Europe” (Hallym International Journal of Aging), “Elder Abuse and Social Work: A Foucauldian Analysis” (Social Work & Society), “Rethinking Trust, Crime Policy, and Social Theory” (International Journal of Criminology and Sociological Theory), “Social Work, Power and Performances” (China Journal of Social Work), “A Genealogy of Old Age, Social Work and Social Policy” (  Journal of Governance of Public Policy), “Foucault, Power and Culture” (International Journal of Humanities and Cultural Studies), and “The Social Philosophical Dimensions of Hospice Care” (International Letters of Social and Humanistic Sciences). Paul Taylor is the Deputy Head of Department and Senior Lecturer in Criminology, Depart-

ment of Social and Political Science, University of Chester. His publications include Mental Health, Crime and Criminal Justice: Theory, Policy and Practice in the United Kingdom (Springer), A Companion to the History of Crime and Punishment (with J. Turner, S. Morley and K. Corteen, Policy Press), A Companion to State Power, Liberties and Rights (with S. Morley, J. Turner and K. Corteen, Policy Press), A Companion to Crime, Harm and Victimisation (with K. Corteen, S. Morley and J. Turner, Policy Press), A Companion to Criminal Justice, Mental Health and Risk (with K. Corteen and S. Morley, Policy Press), Work and Society: Places, Spaces and Identities (with P. Wagg, University of Chester Press), “Gender, Masculinity, Contemporary History and the Psychiatric Secure Estate: Back to the Future?” (with J. L. Powell, Journal of World Scientific News), “The Global South: The Case of Populational Aging in Africa and Asia” (with J. L. Powell, Journal of World Scientific News), “Sentencing Reform and Prisoner Mental Health” (with S. Williams, Prison Service Journal ), “Service User Suicides and Coroner’s Inquests” (with K. Corteen and S. Morley, Criminal Justice Matters), “Severe Personality Disorder in the Secure Estate: Continuity and Change” (Medicine, Science, and the Law), “ ‘Standing’ by: Disability Hate Crime and the Police in England” (with K. Corteen, C. Ogden, and S. Morley, Criminal Justice Matters), and “Tobacco Smoking and Incarceration: Expanding the ‘Last Poor Smoker’ Thesis” (with C. Ogden and K. Corteen, Internet Journal of Criminology). Youyenn Teo is Associate Professor, Division of Sociology, School of Humanities and Social Sciences, Nanyang Technological University, Singapore. Her publications include Neoliberal Morality in Singapore: How Family Policies Make State and Society (Routledge), “Not Everyone Has ‘Maids’: Class Differentials in the Elusive Quest for Work-Life Balance” (Gender, Place & Culture), “Differentiated Deservedness: Governance through Familialist Social Policies in Singapore” (TransRegional and National Studies of Southeast Asia), “Interrogating the Limits of Welfare Reforms in Singapore” (Development and Change), “Support for Deserving Families: Inventing the Antiwelfare Familialist State in Singapore” (Social Politics: International Studies in Gender, State & Society), “Shaping the Singapore Family, Producing State and Society” (Economy and Society), “Asian Families as Sites of State Politics” (Economy and Society), “Gender Disarmed: How Gendered Policies Produce Gender Neutral Politics in Singapore” (Signs: Journal of Women in Culture and Society), “Foreigners in Our Homes: Linking Migration and Family Policies in Singapore” (with N. Piper, Population, Space and Place), and “Inequality for the Greater Good: Gendered State Rule in Singapore” (Critical Asian Studies). Natascha Van Mechelen is Visiting Professor, Department of Sociology at the University of

Antwerp, Belgium. Her publications include “Lutte Contre la Pauvreté et Sécurité Sociale: Fissures dans un Paradigme Politique” (with B. Cantillon, Revue Belge de Sécurité Sociale),“Minimum Income Protection in the Austerity Tide” (with S. Marchal and I. Marx, IZA Journal of European Labor Studies), and “A New Kid in Town? Active Inclusion Elements in European Minimum Income Schemes” (with S. Marchal, Social Policy & Administration). xxvi

Foreword

This book provides an up-to-date review of developments in social policy that covers five continents. It includes detailed discussion of the major Middle Eastern, Africa, Asian, East Asian, South American and post-Soviet welfare states, and of course the much-analysed Western regimes that form the basis of European social policy writing. The range and the research emphasis of the collection enable a broad overview of welfare state regimes; to examine regime development across a wider variety of political, economic and social contexts than do most studies; and to consider possibilities where welfare states are expanding and developing radically new approaches, as well as in the Old World of welfare, where social provision is consolidating or contracting. The volume’s title stresses its contribution as a collection for research. Its major strengths lie in the individual chapters and the way they make information on how welfare states are developing in very different contexts available for researchers. In relation to regimes, the editor identifies as many as 10 welfare state regimes across the world. Others will argue about the scale and significance of the differences he discusses. The point is to open up the welfare state debate and demonstrate that new theoretical insights can arise from a perspective that tackles welfare more broadly across the planet. In relation to contexts, the book itself does not provide a convenient way of comparing the radically different contexts and developmental stages of the different system. This again is food for researchers who can go on to analyse the implications of different ways of doing this. In relation to future possibilities, the volume identifies several future opportunities, for example the expansion of social insurance, the substitution of universal for means-tested programmes, the radical extension of the EU’s Open Method of Co-ordination (OMC) to other continents, the potential of making much more information on the performance of systems available to the public, understood as health and education and social care service consumers, and the development of capital taxation. One challenge is to design these programmes in such a way that they are feasible. For example, the OMC has a chequered history in achieving a closer union of social policy within Europe. Radical changes will be needed to give the approach teeth that enable it to move partners who do not wish to change what they do. Similarly, more effective taxation of capital is fine as an idea, but capital is increasingly powerful in a globalised world in which workers lack the influence they once had, and may not co-operate. Another challenge is to develop welfare programmes in such a way that they build the solidarity needed to secure the support of the mass public for inclusive programmes, something that is proving increasingly difficult in many welfare states, as the individualising ideology of a neo-liberalism predominates in official and media discourse. xxvii

Foreword

The advantage of volumes like this one is that they provide a resource through which these questions and many others can be explored. By the time they have reached the end of the book, the readers will have moved on into a larger world of ways of providing state welfare and of possibilities for developing that provision in the future. Peter Taylor-Gooby

xxviii

Preface

In the history of humankind, there were plenty of good intentions that led to terrible outcomes. That is also true of some particular kinds of social policy instruments that follow a lofty goal, or simply try to please a certain power group, or perhaps just try to face the problem straight on without proper, in-depth reflections of the consequences and side effects of the very same. And it is these unwanted, unpredicted and/or ignored consequences and side effects (e.g. the “poverty trap” and “savings trap”), or in some cases simply non-action (nonsocial policy), that cause misery for millions of people, as well as only a few people (it depends on the case), all over the world. Poverty is increasing as a result of wrongly designed social policy programs (first and foremost, asset- and means-tested social assistance benefits and services), the near-poor have to pay taxes and social security contributions that are used for the poor or where the rich do not pay at all or only marginally for the poor as all the heavy brunt of contributions for social security is coming from income taxation and social insurance contributions levied on salaries, which the very rich and the rich simply don’t have, they don’t have salaries, but capital, companies and real estate that earns their money, which is not targeted for social security contribution and general taxation altogether. It is also absurd that lower middle class people, like nurses, hence, are becoming de facto the prime target group to collect taxes and social insurance contributions that are aimed for the poor. The rich have trust funds, and their companies reinvest before the end of the financial year, and capital gains are running freely (i.e. untaxed), and more importantly free of social security contributions. In an age of super-aging societies, the fate of justice and redistribution is laying on the political will to see the reality in today’s post-modern world, and the same holds true for the developing worlds, where thousands of billionaires shoot out from the ground everywhere, while children go hungry to bed by the tens of millions. Asset- and means-tested social assistance benefits and services (including conditional cash transfer systems that contain asset and means-tests or quasi-means-tests), as well as highly costineffective mandatory private social insurance systems – even though they have been perceived, designed and implemented in good faith – do in fact worsen the conditions of the poor and lead to an extraordinary deterioration of the quality of life of the whole society. In 2002 Esping-Andersen proposed in one of his landmark publications that we need to create a new welfare state (Why We Need a New Welfare State). This book here asked, and hopefully answered, this very same question. Earlier Esping-Andersen, in 1990 (in his article in the International Journal of Sociology), asked two main questions: why do we have welfare states, and are they successful in terms of smoothing the fate of the working classes or transforming them altogether into new middle classes.

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The first question I have answered in other publications (mainly in 2001 and 2002), where I pinpoint the two most important reasons for welfare state development: social movements and electoral competition in democratic countries (apart from involvement in wars). When having a global perspective in mind, the second question may be answered by looking at welfare regime analysis, and Esping-Andersen already has given his ideas earlier that Sweden or the Social Democratic model has achieved the very same – and in his view, not so the United States or Germany. Here, as before, I would like to mention that Germany or the Christian Democratic (Continental European) Welfare Regime has indeed also had relative similar welfare state outcomes as that in the Social Democratic (Scandinavian) Welfare Regime (other researchers have also come to that conclusion in the past). Elsewhere in the world, for example in East Asia, other encouraging welfare state outcomes have also been achieved, although with different overall aims and quite different strategies and policies in place (see my article on the East Asian Welfare Model, 2006). Increasingly so also in South Asia, where welfare state systems are being universalized and pushed to a much higher level (e.g. India and Sri Lanka). Perhaps surprisingly so (for some) also Cuba, where the working classes are still benefiting from the freedom from ill health; the freedom of access to free health care, medicines and treatment; the freedom of education; and the freedom to own one’s own home (Cuba has a home ownership rate of still close to 100 percent). The welfare state recently, and in some cases, very recently, has come to change the fate of the working classes in East Asia (including Southeast Asia) and South Asia, and has for a long time, and still does so now, changed the fate of the working classes in Cuba. But this is not so in other parts of the world, for example Latin America, in most former Soviet Union member states, Africa or the Middle East, where the common people (the working classes and farmers, etc.) have been excluded either by not having social policies, or by having social policies that have built a regressive welfare state system (where the money flows from the general public, including the poor, to the better-off, particularly the rich). Corruption and legal ways to steal the wealth of developing countries (large-scale bailouts, monopolies, friendship economy, tax loopholes, tax exemption and refund programs, etc.), in addition, are first and foremost responsible for the fact that the majority of people in the world today still suffer incredible losses of life chances, happiness, health, and an ever-more incredible loss of life, scale of diseases, violence, crime, social exclusion, as well as global and national neglect. To be able to write this preface and to look at this book at hand, I am deeply indebted to all the contributors, who are all tremendous experts in social policy and particularly on the countries they have investigated. Also, I would like to express my sincere thanks to all the contributors of all my previous edited book volumes and edited journals (hundreds of authors from around the world, for the most part from the developing world) that have helped to open my (formerly, I admit, European-centered) eyes and see that “to end suffering” is the number one goal in social policy – from a global perspective – not providing e.g. pensions (or any kind of social insurance coverage) since a dead or terminally ill person – or a person that does not have drinking water or only drinking water poisoned by arsenic, or a person that is living under the impact of constant crime, violence, terror, and war – cannot de facto profit from and/or enjoy the very same (or if his or her children are dying or suffering from horrible violence, diseases or accidents). We have to see the social policy context in all of Africa, Asia and Latin America.We cannot only rest on past paradigms of social policy making; we have to continue to develop them and to carry them to all parts of the world.True social policy is not exclusive, especially seen from a global perspective. European-centered social policy aims need to be complemented by other aims that focus on oppression, violence, crime, war, terrorism, mass diseases, discrimination, mass casualties due to

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traffic accidents and work accidents, reproducing circles of poverty, lack of proper education, lack of proper housing, lack of political, social and economic rights, and the like. The aims of social policy, hence, need to be (1) to take away and prevent oppression and dehumanization of all kinds, then (2) to add welfare (well-being) and freedoms of all kinds (including social security), and (3) to enable, maintain and defend social development of all countries, regions, cities and counties, in all corners of the globe. Christian Aspalter Pasching, Austria

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1 Introduction Christian Aspalter

The world of today is particularly exposed to new developments, locally and globally.The problems of the 20th century have not been solved yet, for example gender and ethnic discrimination and particularly, through the workings of dual welfare state systems (see Sainsbury, 1993, 1999; Dixon and Scheurell, 1994; Hobson, 1994; Pascall, 2008). Already there are new challenges unraveling the economic and social fabric of developed welfare state systems, such as long-term massive unemployment, ever-increasing poverty and social exclusion, lack of societal fertility and now massive waves of immigration across continents. Newly developing welfare state systems have managed, however, to silently rise and put their mark on global social policy. Brazil, China, India and Indonesia are fast-rising pioneers (and not just copying welfare state institutions of the West) in global social policy. Conditional cash transfer (CCT) systems saw the light of day in Brazil. China now has universal coverage in terms of rudimentary health insurance and soon universal coverage in terms of minimum pensions in the country – with the largest population on earth. India is focusing instead on the human right to food, the human right to work and the human right to basic (i.e. necessary) medicines, which are provided for free, universally, in all corners and remote areas of the country. And Indonesia, too, after some time of difficulties of getting the political will together and some additional time to implementing social policies and programs, now at a much faster speed, shows a rather great and promising future in social policy, advancing its own welfare state system, ahead of the onset of an aging society (see Walker and Aspalter, 2015). It was high time, hence, to roll up the sleeves and investigate the state of social policy and that of welfare state systems in all parts of the world, as much as possible, within the limitations of space of a single volume. This volume also envisions to be critical and, if possible, help break the silence about continuously globally rampant social injustices, different forms of discrimination and social exclusion, unwarranted poverty, hunger, illness and deaths on an unimaginable scale across the globe, as well as about failed or missing social policies that could mitigate or prevent such problems altogether. The main weapon against all this is and should be science, the science provided by the academic discipline of social policy. Only through empirical research, proper theoretical understanding of empirical realities and professional evaluations in the field of normative – and necessarily comparative – social policy, can one start to guide governments and intergovernmental 1

Christian Aspalter

organizations to start doing the right thing, that is, to start implementing better-working strategies and to avoiding counterproductive programs, policies and social security system designs. The contributors to this volume hope to have provided a bit better understanding of what is going on in the world of social policy, in all of the world. The structure of the volume is straightforward. After the introduction, there are two chapters that both compare welfare state systems around the world and look into the future of those welfare state systems, but from very different angles. Then comes the succession of country case studies from around the world (following a more or less circular motion), all of which investigate the general traits and main features of welfare state systems, as well as past, current and future trends. Each focuses on a special topic in addition, to enable better learning and comparing across not only international borders, but also and especially across all continents – which is indeed a very rare feature in the international comparative welfare state literature. Chapter 2 by Christian Aspalter is applying the ideal-typical welfare regime approach – the methodology for which was developed by German sociologist Max Weber – which is applied by the famous 1990 book by Gøsta Esping-Andersen. Due to the global nature of this book and new developments of applying ideal-typical welfare regime focus outside of the traditional European welfare state context, Aspalter for the first time here has extended the reach of idealtypical welfare regime analysis to apply it to other parts of the world, not just Europe, East Asia and Latin America (Aspalter, 2006, 2011; see also Aspalter, Kim and Park, 2009), arriving at least at 10 different worlds of welfare capitalism or ideal-typical welfare regimes (models) – and hinting at more yet to be identified, perhaps, in future. In the second part of this chapter, Aspalter looks at the importance of understanding and evaluating different major system designs and choices in setting up and running social security systems (including social assistance systems). It is of utmost importance to distinguish the very good and good social policy solutions from the ones that are not good enough or not good at all. For this purpose, Aspalter introduces the normative theory of Developmental Social Policy (DSP), which points out clearly the positive and negative choices of policies and system designs in providing social security and welfare benefits and services to the people all over the world. As both approaches are needed, the ideal-typical and real-typical methods in comparative welfare state analysis (Aspalter, 2012a), Peter Abrahamson in Chapter 3 throws in his global, firsthand experience on welfare state systems around the world and his long-standing expertise in the welfare modeling business (Abrahamson, 1999) to analyze past and current developments of welfare state systems from around the world, region by region, by applying a real-typical welfare regime perspective, and then to make projections into the future of his own. While Aspalter (Chapter 2) believes (due to ongoing aging and fiscal austerity of welfare state systems, etc.) that the face and inner workings of the future welfare state systems down the road of the 21st century (much further down the road, 2050 and beyond, or perhaps earlier) will change in that new system solutions and system designs and policy strategies are to dominate – side by side with successful old solutions – designs and strategies of future welfare state systems, Abrahamson holds on to a European conviction that the welfare state of today will also be the welfare state of the future, and that changes will be minor rather than larger. The Australian welfare state system, the first case study of this book (Chapter 4), is investigated by Philip Mendes. Australia always was and still is a strong outlier in the family of neoliberal welfare regimes (even from an ideal-typical perspective). Mendes excellently works through and explains the inner workings and program choices of the Australian welfare state system, which is based on the principle of (paternal) control of the government and its street-level agencies and the principle of punishment and blame for being poor or unsuccessful (economically, that is) and which is executed in a rather meticulously state-managed (bureaucratic and paternalistic) 2

Introduction

manner (see Howard, 2003). Australia is a particular case in point for the inner works and overall results of AMT welfare benefits and services, which in the long run increase poverty due to the inbuilt mechanisms of poverty trap and savings trap (see Midgley and Aspalter, 2016). The second country study is conducted by Peter Abrahamson in Chapter 5, investigating the special characteristics of the American welfare state system, which is by and large modeled on the English Poor Law tradition and featuring a number of asset- and means-tested social assistance programs (AMTs), some of which are among the largest in the world. This contributes to the fact that America is among the largest spenders on welfare globally speaking (especially when also considering private welfare expenditure). AMTs, apart from state subsidies to social security pensions and the largest tax welfare state in the world for the middle and upper classes in particular (see Feldstein and Liebman, 2002; Howard, 1993, 1999), are the cause for a massive welfare state system in the US. Also, in terms of public health care spending in US dollars (PPP) per person per year, the US has been ranked among the top three countries in the world (see Aspalter, 2014), with only Luxembourg and Norway “outperforming” the American welfare state system in absolute terms (Aspalter, 2012b). The US welfare state system is a very economically inefficient welfare state system. It is in fact the most inefficient welfare state system in the world due to a mix of super-heavy expenditures on AMTs and a large regulation-heavy mandatory private social insurance system, the socalled Affordable Care Act (ACA) or Obamacare, that supports and generates the greatest levels of profits for especially the private finance/insurance industry, the pharmaceutical industry, the hospital industry and law firms alike. The super-heavy reliance on AMTs discriminates – with its poverty-trapping effects, especially “savings trap” and “poverty trap” (see Midgley and Aspalter, 2016) – against women and ethnic minorities that find themselves on the vulnerable side of the formal labor market. Hence, the welfare state system in the US is also one of the most gender and minority discriminating welfare state systems in the world, besides Australia, for example (see Baldry and Green, 2003; Abramovitz, 1996; Mitchell, 1997; Kingfisher, 2002, 1996; Goldsmith and Kingfisher, 2003; Scheurell, 2003). The Cuban case study is provided by Carmelo Mesa-Lago (Chapter 6), who builds on experience over many decades on all major welfare state systems in Latin America and the Caribbean. Pointing out the uniqueness of the Cuban welfare state system in the region, MesaLago advises greater play of private (especially church) agencies in welfare delivery to be able to cope with the great overall demand for welfare services. He also worries a great deal about the financial sustainability of the universal welfare state system of Cuba under the currently available economic and public resources, which may or may not be relieved substantially after the further ongoing lifting of economic sanctions imposed by the US under the current Obama administration. Even though with all the disadvantages the current communist, non-market economy of Cuba brings with it, the universal welfare state system in place does actually very well, in objective terms; for example, Cuba has consistently achieved significantly lower infant mortality rates and under-5 mortality rates than its giant, industrial, lead capitalist neighbor, the US (Aspalter, 2017). Gabriel Martínez, in Chapter 7, shows that the Mexican government is aiming at more universalism in these coming years, while having developed at the moment a welfare state system that is still heavily relying on a particular type of AMT conditional cash transfer (CCT) system. The CCT system of Mexico (apart from being essentially also based on AMT) also shows good elements, especially the perspectives of a new social policy strategy applied that change people’s behaviors, trying to build families’ human capabilities (that is, human capital, see e.g. Midgley and Aspalter, 2016), particularly in education and health care aspects. Like in most other Latin 3

Christian Aspalter

American countries, there is a great gap between people covered by social insurance systems that are usually heavily subsidized by the government, and the poor people, who are made to rely on dependency reinforcing AMT-based social welfare benefits and services (see Aspalter, 2011). According to Martínez, half of the population is covered by formal social security systems (social insurance), and those who are mainly working in the informal sector account for the other half. Recent efforts by the Mexican government to reduce the share of people working in the informal sector have been without any significant success. Taking on another key Latin American welfare state system, Silvia Borzutzky and Mark Hyde (in Chapter 8), discuss in full length the case of the Chilean welfare state system. Borzutzky and Hyde make it clear that in the case of privately run provident fund systems (PFS), as in the case of the Chilean old-age pension accounts, profits are high for private companies who run PFS, but return on investment for the members of these systems, for this very reason, are very low (see also Borzutzky, 2002a, 2002b). Hence, state-run PFS are a much better choice, as they avoid high administrative fees and profit-taking from companies. In the Chilean health care sector, old inequalities have been exchanged with new ones, depending largely on the type of diseases being covered or not. Chilean social policy development is, in short, torn between efforts to neoliberalize social policy, and efforts to support public well-being and with it the social rights of Chilean citizens, recent change in presidents, and the peculiar mix of social policies applied over the past decades are paramount to this special characteristic of the Chilean welfare state system. The last of the big Latin American welfare state systems covered by this book is presented by Christian Aspalter in Chapter 9. Against the belief of some foreign observers that Brazil has developed a strong or any kind of significant universal welfare state system, Aspalter confirms vehemently that despite some success in terms of universal health care delivery, generally the opposite is the case. The Brazilian welfare state system is, so says Aspalter and some other local and foreign analysts (such as Novy, 2001; Suter and Budowski, 2001; Farias, 2003), heavily regressive in terms of redistribution, particularly due to its emphasis on state subsidies for pension systems, and especially for public servants. The dominant conditional cash transfer system in place is means-tested and hence designed to keep the poor people in place, in terms of their submission to economic destitution, due to the workings of the “poverty trap” and the “savings trap” that are caused by any AMT social assistance or social service program (see e.g. Aspalter, 2016a; Midgley and Aspalter, 2016). Only 0.5 percent of the country’s GDP, hence, goes into this form of welfare state program in Brazil, enough to get credit in local and national elections, and by far not enough to lift the poor people of Brazil out of poverty, while also helping to lock the poor up in poverty (perpetually). A solution here is very simple: take out any AMT element (also all quasi-means-tests) and replace them entirely with (1) non-economically targeting (NET), such as based on poverty maps (i.e. geographic targeting) and/or household targeting, and so forth; and/or (2) universal benefits and services (UBS). Going into the heart of Africa, Chapter 10 by Bruce Josephson discusses problems that are key for any understanding of most African welfare state systems that face not only technical, financial and administrative difficulties, but even more so, a context of widespread violence, even war and terrorism, and political disintegration, hyper-fast population increase and socio-economic inequalities across their nation state. Josephson suggests that Nigeria has to deal with dire corruption, and then possibly extending the coverage of the social security system in terms of the population covered, and at the same time build and increase some kind of redistributive social security system (see Dostal, 2010). In Nigeria, like in most African countries, the government officers are taking the bulk of the country’s wealth for themselves, and in this way prohibit any meaningful start-up or kick-off of social and economic development for the rest of the population. 4

Introduction

Chapter 11, written by Paul Taylor and Jason Powell, investigates the case of the UK, with particular reference also to the mental health care situation there. With all the attempted privatization policies of the last 20 years, the UK’s welfare state system has been to a large extent “hollowed out,” as they write.The National Health Service also suffered greatly during the years of the Labour government under Tony Blair, ever since the late 1990s (see Aspalter, Uchida and Gauld, 2012). There is, however, also good news from social policy making in the UK, where there is a marked new focus on financial incentives and a new orientation towards outputs and successes (instead of expenditure and utilization patterns) (see Midgley and Aspalter, 2016). For the UK, and for the developed (and developing) world as a whole, we need to refocus on what a social investment state really is (see e.g. Abrahamson, 2010; Keersbergen and Hemerijck, 2012). This chapter lays important groundwork towards that direction, particularly by focusing on investment in mental health of the population and its causal connections to poverty. In Chapter 12, Joakim Palme delivers a full-fledged insight into the Swedish welfare state system. The Swedish welfare state system is built on the premise that if the middle classes are fully integrated into the welfare state programs and columns, then they will fully support the very same, also by paying high rates of tax and social security contributions (another form of taxes, really). This is what Walter Korpi and Joakim Palme (1998) called the “Redistribution Paradox.” The Swedish welfare state system in fact embodies an antidote of a neoliberal welfare state system, and so are neighboring Nordic welfare state systems.While Sweden is greatly reported in the comparative social policy literature, Finland, Norway and Iceland fare much better in terms of wealth equality (as opposed to Sweden or Denmark). Norway, Finland and Iceland, besides having low levels of income inequality, also have achieved low levels of wealth inequality, which is perhaps much more important than income inequality (see WK, 2016). Still, Sweden exemplifies one of the best-performing welfare state systems in the world – also in terms of economic efficiency. The Swedish economy is an open economy that is facing fierce global competition. Palme reminds us that Sweden is a full-fledged welfare state precisely because of its economic openness. The highest levels of effectiveness (lowest levels of poverty and preventable mortality; highest levels of well-being and happiness, etc.) and efficiency (very cost-effective, for example, when comparing the Swedish health care system to the rest of the world, and especially to that of the US) are truly remarkable and have still escaped the attention of most economists around the world. Sweden, besides its neighboring countries, is an example of how to avoid gender discrimination and discrimination of ethnic minorities by avoiding institutional disadvantages of dual welfare state systems – the ones that have tax-subsidized social insurance for better-off workers, and poor-law-oriented social assistance, based on AMTs, particularly for women and those on the margins or lower ends of the formal labor market that are also often based on short-time and part-time, irregular forms employment. Universal social insurance combined with universal social benefits and services, and especially work-enhancing and public employment–focused social policy, manifests one very important and successful strategy of how to avoid gender and ethnic discrimination, and poverty and social exclusion in general. With the recent onset of additional massive migration into Sweden, the fate of the generous Social Democratic welfare state system (in ideal-typical terms) is, however, yet to be determined, as the work-creating and nature of the Swedish welfare state system, focused on investment in human capital, is being put to test – with hundreds of thousands of newly arrived migrants who do not speak Swedish, do not have local professional diplomas, and so forth. The French welfare state system is analyzed by Tom Chevalier and Bruno Palier (Chapter 13), with a special focus given to the dire problem of youth unemployment that not only haunts 5

Christian Aspalter

France, but almost all long-term industrial/post-industrial countries – with the notable exception of relatively much lower youth unemployment rates of Germany, Austria and Switzerland in Europe, and Japan and South Korea in East Asia (see WB, 2015), which points to the important impact of the primary focus on vocational education apprenticeship system in the three Western Central European countries and the general strong education systems in Japan and South Korea (heavily focusing on mathematics and hence technology). France is a typical welfare state system for most of the industrial/post-industrial world, and still follows a main strategy of increasing social insurance contributions incrementally and consistently. New and very promising in terms of financial sustainability is the development of the Contribution Sociale Généralisée (CSG), which since its upgrading in 1998 has become an additional major source of welfare state funding, by taxing capital income to finance social security. Unfortunately, salaried incomes are also covered by this social security tax, which increases the burden on low- and mid-level income earners even more.The solution must be only to tax other forms of income – other than salaried incomes – to lessen the burden on the working classes, as well as the lower and middle classes (and to enhance the “right” flow of financial redistribution “from the bottom to the top”). But among all the pressure, there is creation and creativity in European social policy (see e.g. Manning and Shaw, 2000; Bonoli, 2005;Taylor-Gooby, 2005;Armingeon and Bonoli, 2006; Bonoli and Natalie, 2012). New paradigms of “learnfare,” “upskilling” and “enhancing human capital” are (seen from a historical perspective) coming to the fore at a relatively fast speed (see Bonoli, 2010). The main problems are the same in France as in most of the developed industrial world – as well as, surprisingly for some in the West perhaps, also the developing world, be it in Asia, Latin America or elsewhere.That is, there is an increasing dualism between a well-protected population that relies in general on generously subsidized social insurance systems, and increasingly so another major part of the population (predominantly also non-working and working women) that is “managed” by asset- and means-tested social assistance and social service programs, or “bad CCTs” (see also Aspalter, 2014, 2015) that is, those conditional cash transfer systems rely also on AMTs (i.e. economic targeting). For this reason, more and more marginal, socially and economically excluded parts of the population are being sucked into and contained within the poverty threshold (see the impact of poverty and savings trap, Midgley and Aspalter, 2016) – in other words, the poverty of an increasingly large population is being continuously, slowly but surely, “institutionalized.” In the next chapter Bea Cantillon, Diana De Graeve and Natascha Van Mechelen deal with the case of the Belgian welfare state system (Chapter 14). As any of the old established welfare state systems, Belgium is being confronted with the realities caused by post-industrial societies, or to be more precise the effects and side effects of industrialization itself that become apparent only at a later stage, that is the state of second modernity (post-industrialization) (see Beck, 1992, 1999, 2000). New social risks and new social problems (see Manning and Shaw, 2000;Taylor-Gooby, 2005, etc.) are mounting while we fail to address the weakness of current old welfare state systems. Belgium is a case in point. The Bismarckian set-up of the Belgian welfare state system is the dominant feature of the institutional set-up that is shared by most welfare state systems in the world, including most of Europe, the Middle East, Northeast Asia, most of Africa, as well as partially also the US and Latin America. In Belgium, the institutions of redistribution are working, in the sense that they transfer a great deal of money and resources from “A” (mostly the middle classes, but also heavily the working classes) to “B” (mostly the working classes, but also heavily the middle classes).The upper classes, to a very large extent, evade taxation, and they do not rely on salaried income (which is the main source of income for the state, by way of social insurance contributions and income tax). 6

Introduction

The current state of affairs of the Belgian welfare state system is one of low employment (high unemployment rates), high social expenditures and social transfers and relatively low posttransfer poverty. Social spending on new social risks is on the rise – such as social spending on elder care, childcare, career breaks and active labor market policies – and reversibly so for old social risks. The special focus of this chapter deals with a particular form of targeting with universalism that aims to reduce the burden of out-of-pocket payments for vulnerable families by way of selective targeting within the health care system. Karl Hinrichs sheds light onto the case of Germany, yet another case of a Bismarckian welfare state system par excellence (Chapter 15).This type of welfare state is most heavily challenged by the features of post-industrialism and demographic aging combined with fertility decline.There is a new emphasis on sustainable family policy that aims at achieving, in the end, a higher overall fertility rate, but it has not yet been fully developed and implemented. Generational equity has become of the greatest concern in Germany, apart from the fiscal crisis that societal aging has caused for the Bismarckian social insurance systems.The special focal point of this chapter is the German pension system. Germany, so far, has experienced a partial but still very limited form of privatization of the pension system, by way of (1) introducing the new Riester Pension Plan that is only aimed to partially replace income loss due to the impact of the fiscal downsizing of public pension benefits in the years to come, and (2) new defined contribution–based occupational pension plans, which are tax-exempt.The German welfare state system from a real-typical point of view has become more privatized and more asset- and means-tested, but not to the degree that it constitutes any kind of a new welfare state regime or model from an ideal-typical point of view (see Aspalter, 2012) – that is, any kind of a “new welfare state” according to Hinrichs. Thus, in a nutshell, things get worse, not better – as Germany drifts away from the normative directions (policy solutions) given by the normative theory of DSP (see Chapter 2). Yet another old-timer in the realm of welfare state systems is Austria, which is analyzed by Kai Leichsenring (Chapter 16). As any other post-industrial society, the Austrian economy now more than ever before provides a great deal of atypical employment, that is particularly, short-term work, part-time work, work based on labor leasing contracts, as well as fee-based consultation or project work and work based on commissions and royalties, especially selfemployment – so-called one-person enterprises(e.g. nurses, social workers, consultants). Leichsenring specially draws attention to the long-term care insurance system in Austria, which is unique in the form that it is in fact a hybrid of an insurance system and a universal benefit system, as non-insured members are also entitled to long-term care services, as long as they have proof of need (children, youth and young to middle-aged adults are also covered). The Austrian long-term care system (set up in 1993–1994) does not suffer from contract problems that cause expensive transaction costs and administrative costs, as does its Japanese counterpart (Aspalter and Lai, 2003), and, due to its feature of universal benefit entitlements, it is clearly to be preferred to the German version (see the preference of universalism in Chapter 2). Due to its special government system, Switzerland’s inner workings of social legislation and hence the Swiss welfare state system is unique when seen from a real-typical perspective. In Chapter 17, Jean-Michel Bonvin and Stephan Dahmen perfectly paint the institutional context and the logic and reality of veto powers and their impact on social policy–making in the Swiss confederation. The Swiss welfare state has been a latecomer to welfare state construction, and especially welfare state spending (see Esping-Andersen, 1990), but now it features one of the largest social welfare budgets in Europe – mainly due to the workings of its relatively wellendowed universal basic pension system (with no upper limits of contribution payments), the increasing number of accepted cases under the disability insurance scheme, and the expensive set-up of its health care system, but also an increase in welfare spending across the board (see 7

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Aspalter and Wang, 2006; Aspalter, 2006; Kim, 2008). The Swiss health care system is a compromise between social and a private insurance, which perfectly explains its significantly higher costs, as percent of GDP. Special attention is given in this chapter to the education system, where Switzerland, against the practice of most other countries in the world, is heavily prioritizing vocational and technical schools, all the way to the university level – a system which explains the top-notch rankings of Swiss universities and the highest levels of applied technology in the world, and with it a highly competitive industrial sector. The Swiss education system is only matched by, for example, Austria at the high school level and India at the university level. Markus Kainu, Meri Kulmala, Jouko Nikula and Markku Kivinen investigate the case of the Russian welfare state system (Chapter 18), with special reference to geographical inequality.The Russian welfare state system is embedded in a highly federal constitutional setting, apart from Germany, Austria, Switzerland, Canada, the US and India. The Russian Federation is the largest country in the world, although it is relatively sparsely populated, especially in the center (Siberia) and east of the country (the Russian Far East). The geographic disparities result from relative political independence of the federal subjects (provinces, partial republics, etc.) and regions, which is paired with the new fiscal dependence on Russian central state finances since the Putin Era, which is the result of recent tax reforms: pulling all tax revenues to the headquarters of corporations and residence of billionaires, in short, Moscow, away from all other federal subjects. Whereas under President Yeltsin the country experienced great inequality due to privatization and decentralization across the board, the Putin era saw a partial reversal of that trend (see e.g. Remington, 2015; CIA, 2015). Now, the central government is mainly responsible for general policies and principles, and national standards in health and social policies. The Russian welfare state system failed to address the most pressing problem of extremely low male life expectancy, and only partially addresses the problem of an extremely low fertility rate. Adem Yavuz Elveren and Tuba I. Argatan in Chapter 19 address the developments and issues of concern of the Turkish welfare state system, with particular reference to human capital (capabilities) formation. Elveren and Argatan typify the Turkish welfare state system as being indirect and minimalist, and also featuring Bismarckian traits of a strong hierarchy of beneficiaries. The social security system is highly fragmented, and social rights are distributed unequally. Therefore, this welfare state system can be called inegalitarian corporatist, in real-typical terms. Social assistance programs are non-existent, and the family has to take over the function of a minimal economic support system of last resort. Like most developing countries, Turkey still has a staggering informal sector that impedes the development and extension of, for example, formal social insurance systems. There is in the recent period also a trend towards a higher degree of universalism in health care services, which makes Turkey a very interesting case in comparison to international welfare state systems – particularly the Christian Democratic welfare regime in Western, Eastern Central and Southern Europe and (partly, perhaps) the anti-welfare conservative welfare regime in Latin America or the slightly universal rudimentary welfare regime in South Asia (see Chapter 2), in ideal-typical terms. The chapter on Israel, written by John Gal (Chapter 20), highlights the importance of social inclusion in any welfare state system. In the Israeli case, the absence of social inclusion is particularly interesting and challenging for any social policy maker in the context of ethnic exclusions of large parts of the population from the welfare state system. There are some similarities to the welfare state systems in the Western Mediterranean region in real-typical terms, apart from the heavy built-in systems and policies differentiating among various population groups in Israel (see also Rosenhek, 2003), and quite a number of universal features the Israeli welfare state system that have been constructed since the 1970s. Like in most countries around the 8

Introduction

world, neoliberalism also arrived in Israel and consequently set out to privatize the public good of social welfare services and public social security and social assistance systems. The impact has been deeply felt in Israel, as in the most-developed, longest-developed welfare state systems in the heart of Western Europe (from France to Austria). The case of the Indian welfare state system is examined by Christian Aspalter (Chapter 21). Having here classified India for the first time, in ideal-typical terms, Aspalter focuses also on the new feature of increased universalism across the board of Indian social policy, not only (a) the new universal provision of food across the country, that now works very well (given its troubled past with corruption and the like, which has been largely reversed due to the application of high technology and new forms of direct public management), and (b) universal dispensing of free-of-charge medicines (the most important medicines of all major categories), but, in addition, also new universal primary education, are now showcasing a new welfare state regime that marks India, and with it also its neighbors, such as e.g. Sri Lanka (with universal health care and education there). India is a rising giant in welfare state development, but the percentage shares are low (still, of course). However, the overall size of programs and systems in place are massive and of global significance. For example, another case in point here is the Integrated Child Development Services program in India, the largest of its kind in the world, and which generally works well. Another welfare state system that is being newly constructed is that of Indonesia, home to a quarter billion people. Jörg Michael Dostal and Gemati Ekacita Naskoshi (Chapter 22) show that the 2004 law to implement a universal and compulsory social security system has brought indeed a sea change in social welfare policy in this part of the world. Although it is a rather slow and lengthy process, the country is building a new more universal welfare state system, thus gradually replacing the former painful (costly and administratively troublesome) experience of trying to implement a social assistance system based on AMTs after the Asian Financial Crisis of 1997–1998 (see also Teguh-Pribadi, 2016, 2017). The BPJS (Badan Penyelenggara Jaminan Sosial) law of 2011 introduced a new era of universal social security in Indonesia. The first program, the BPJS for Health, started to operate in January 2014, while the BPJS for Workers program that will eventually provide pensions for all (also covering benefits in case of accidents or death) was implemented in July 2015. A major step forward in terms of health care was the 2014 SJSN (System Jaminan Sosial Nasional) law on implementing universal health insurance coverage. For the future extension of the social security system in Indonesia, the government has set out clear and concrete roadmaps for further development ahead in the years to come. Youyenn Teo in Chapter 23 investigates not only the inner workings of the overall Singaporean welfare state system, but also and in particular the ethics related to extreme familialism built in the regulative system attached to the famous and widely celebrated (and otherwise very advantageous) Singaporean social security system that is based on the Central Provident Fund (CPF) system. The CPF is perhaps the most efficient social security system in the world, but would need greater pairing with universal health care and other universal social welfare benefits and services (see Aspalter, 2016b). The Singaporean welfare state system is perhaps the best exemplary case study of an extreme conservative welfare state system (see also Low and Aspalter, 2003; Aspalter, 2006). Teo describes in great detail the downfalls of familialism when integrated into any type of social security system (see Esping-Andersen, 1990, 1999), here in the case of Singapore.While Continental European welfare state systems (the Christian Democratic Welfare Regime) also severely cause negative repercussions (in this case mostly for single mothers and women in general, see e.g. Pascall, 2008), the Singaporean welfare state system also causes severe consequences for both partners in case of divorce and their children, as they are, for example, forced to sell their public housing unit and lose their family home and residence (and with it 9

Christian Aspalter

the basis of their retirement wealth), just because they do not fit into the conservative mound of a perfect family world, where divorce is punishable by de facto eviction. Other non-textbooktype families (e.g. homosexual couples or non-married but cohabiting couples, with or without children) do not even have the chance to apply for public housing units and to enjoy subventions and grants, and the growth of the retirement wealth in the form of housing ownership and rising real estate prices. The welfare state system of Mainland China is examined thoroughly by Carmel K. M. Lee (Chapter 24). China, like most developing countries, suffers from a great – and on purpose institutionally designed – dichotomy between rural and urban areas in terms of welfare state systems in place, and in terms of actual social welfare benefits and services provided. Thus, there are different degrees of citizenship and social rights assigned to different groups of the population. Let alone the vast urban rural disparities in social development and social security and social assistance provision, as well as education and health care services, the greatest challenge still is the institutional negligence of migrant workers and their families – 262 million, according to the government’s latest figures. There are some similarities to India (see Aspalter, 2005, 2008) with regard to central social policy planning in China, but the implementation and refinement of details will hinge upon the will and capacities of local governments, and in some cases provincial governments.The Chinese welfare state system, all in all, is highly fragmentized (  just like Brazil, India, etc.): while universal health care coverage is nearly complete only in terms of population coverage (not medicines and treatments), only about half of the population has been covered by any sort of public pension system. China has made great progress in the last half-dozen years (a positive revolution indeed, when seen from a historical perspective) and hence is expected to continue to do a great deal in the years and decades ahead, especially with the coming superaged society in China. In Chapter 25, Joe C. B. Leung gives a clear overview of the welfare state system and its recent developments in Hong Kong. Being a welfare state system that heavily relies on AMTs (what is called social security in Hong Kong) and services, Hong Kong was never able to abolish or reduce significantly its overall rate of poverty. Conversely, as expected by DSP theory, for example (see Midgley and Aspalter, 2016), the problem of poverty is increasing over time due to the long-term effects of the “savings trap” and “poverty trap” that are caused by any kind of asset- and means-tests. According to Leung, Hong Kong is a residual welfare state system. The system in Hong Kong features individual savings accounts for retirement, heavily subsidized public health care services that are available for all Hong Kong residents at relatively very low costs, and asset- and means-test welfare benefits and services. Poverty is being managed, increased and prolonged over time, rather than prevented or reduced. Hence one can still observe a large influence of UK social welfare policies and traditions in the case of Hong Kong, from a real-typical point of view. This chapter in particular focuses on a series of new initiatives in the provision of social assistance and services for needy people in Hong Kong, which is still marked by dire levels of poverty for quite a large number of people in one of the richest cities on earth. The next chapter runs down an analysis of the Taiwanese welfare state system (Chapter 26), with special reference to its hallmark universal health insurance. Yih-Jiunn Lee and Yeun-Wen Ku provide key insights to the inner workings of the welfare state system in general and the health care system in particular. After great advances in the democratic governing system of Taiwan, President Lee Teng-Hui introduced the universal national health insurance system, which started to operate in 1996. It is a rather strictly government-controlled and centralized system, and therefore much better in terms of efficiency and controllability at implementing health care reforms (see difficulties of the South Korean counterpart in this regard, e.g. Aspalter, Uchida and 10

Introduction

Gauld, 2012). The rest of the welfare state system in Taiwan still exhibits remnants of Bismarckian differentiation between occupational groups and their entitlements and/or contribution rates, heavily privileging civil servants, school teachers and administrators and military personnel. From 1993 to now, the wide-ranging network of AMTs that has been implemented has become rather generous over time, and changed the outcome of democratic elections in favor of those political candidates and parties that promised these kind of welfare allowances (see Aspalter, 2001, 2002, 2010). The following Chapter 27 – which is written by Jinsoo Kim and Christina Hießl – aims at explaining newfound worrying trends in the case of South Korea, which is only further ahead in terms of post-industrialization, compared to the rest of the developed world. Trends include fast-growing income polarization among the secure fixed-term employed sector of the labor market and the fast-rising sector of the labor market that has to make a living on short-term contracts, part-time contracts and/or non-labor-based contracts (see the neoliberal labor market reforms by President Kim Young-Sam in 1993 and thereafter, e.g. Kim and Ahn, 2003), as well as the rise of other forms of income, that is, income diversification. Jinsoo and Hießl discuss in detail these troublesome trends not only for social insurance organizations around the world, but also more so for the insured and those no longer insured, and last but not least whole governments and economies that will lose the basis of the hitherto social contract and social harmony by causing poverty to prosper and popular discontent to rise. Kim and Hießl predict, based on past experiences and data, that the ongoing polarization and segmentation of the labor market will continue, together with the diversification and blurred boundaries between different sources of income. Therefore, these new trends will pull the rug out from under the existing social insurance systems in Korea (and the rest of the world, with perhaps some delay here and there), and with it the basis of the entire social contract that the society and economy, and political legitimacy, is built on. A solution here would be to levy a CSG-type social security tax, but only on non-salaried forms of income, that is only capital incomes and not on salaried incomes (Aspalter, 2009). The Japanese welfare state system is put under scrutiny by Christian Aspalter and Hubert Liu (Chapter 28). Aspalter and Liu show in this study that the Japanese welfare state system has already reached Continental European social spending levels. The model of welfare regime in Japan is very different from that of the Christian Democratic Welfare Regime in Continental Europe (including Southern Europe and large parts of Eastern-Central Europe, see Aspalter, Kim and Park, 2009). The Pro-Welfare Conservative Welfare Regime in East Asia, to which Japan belongs, has a much less redistributive focus, and employs a greater emphasis on the work achievement and work status of individual citizens than its Continental European counterpart. Also, much more emphasis is given to the role of the family and non-governmental organizations, as well as private companies, in welfare provision in Japan, while the overall regulatory and interventionist strategy of the Japanese welfare state system fully distinguish it from any member of the Liberal/Neoliberal Welfare Regime in Anglo-Saxon countries.The future of the Japanese welfare state system is marked by a lot of challenges that are about to unravel Japanese politics (including its welfare state policies), its economy and society as such. The sheer extent of aging of society in Japan is monumental, soon to be expected (by the middle of this century) to reach the state of a super-super-aged society, with over 40 percent of the population having passed their 65th birthday. The chapter ends with suggestions, as provided by DSP, to “manage” the hardly manageable: to keep the Japanese welfare state system afloat, financially speaking and regarding its functioning in terms of increasing effectiveness and efficiencies of current social security systems and programs, and by reforming/adding new social security systems designs, especially incentive structures and financing mechanisms. 11

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The last chapter of the book (Chapter 29) revisits major lessons that the editor has learned along the way from literally hundreds of social policy experts and their case studies and research works from around the world, especially from a normative social policy perspective. This introductory chapter was not meant merely to summarize the individual chapters, but also to provide additional points of view and evaluations, here and there.The following theoretical chapters and country case studies will depict a thorough picture of welfare state systems around the world, as they are, with each chapter featuring a special focus, to gain analytical value, and deeper insights in more areas (old and new heartlands) of social policy, in all parts of the world.

References Abrahamson, P. (1999), The Welfare Modelling Business, Social Policy and Administration, Vol. 33, No. 4, pp. 394–415. ——— (2010), European Welfare States Beyond Neoliberalism: Toward the Social Investment State, Development & Society,Vol. 39, No. 1, pp. 61–95. Abramovitz, M. (1996), Regulating the Lives of Women: Social Welfare Policy from Colonial Times to the Present, South End: Boston, MA. Armingeon, K. and Bonoli, G. (eds.) (2006), The Politics of Post-Industrial Welfare States: Adapting Post-War Social Policies to New Social Risks, Routledge: London. Aspalter, C. (2001), On the Road to a Taiwanese Welfare State: Political Parties Capitalizing on the Issue of Social Welfare, in C. Aspalter (ed.), Understanding Modern Taiwan, Ashgate: Aldershot. ——— (2002), Democratization and Welfare State Development in Taiwan, Ashgate: Aldershot. ——— (2005), Development Constraints and Social Policy in India: A Political Explanation, Journal of Comparative Social Welfare,Vol. 21, No. 2, pp. 55–66. ——— (2006), Fighting Old-Age Poverty: Universal Pension Schemes in the Netherlands, Switzerland, New Zealand, and Canada, National Pension Corporation, Government of Korea: Seoul. ——— (2008), Systemic and Structural Problems of the Chinese Welfare State, paper presented at the conference of Korean Social Security Association and Asian Association for Social Welfare on Sharing the Experience of Social Security in the North and South, November 21,Yeouido, Seoul. ——— (2010), Pensions reform in Taiwan: Die Bedeutung von Politischem Wettbewerb und Medialem Diskurs [Pension Reform in Taiwan: The Role of Political Competition and Media Discourse], http:// papers.ssrn.com. ——— (2011), Developing Ideal-Typical Welfare Regime Theory, International Social Work, Vol. 54, No. 2, pp. 735–750. ——— (2012a), Real-Typical and Ideal-Typical Methods in Comparative Social Policy, in B. Greve (ed.), Routledge Handbook of the Welfare State, Routledge: London. ——— (2012b), European and Asian Health Care Systems in Comparison, in C. Aspalter,Y. Uchida, and R. Gauld (eds.), Health Care Systems in Europe and Asia, Routledge: London. ——— (2014), Social Work Services and Developmental Social Policy, in C. Aspalter (ed.), Social Work in East Asia, Ashgate: Aldershot. ——— (2015), New Perspectives for Active Ageing: The Normative Perspective of Developmental Social Policy, in A. Walker and C. Aspalter (eds.), Active Ageing in Asia, Routledge: London. ——— (2016a), Categorical and Conditional Cash Transfer Systems in Latin America and the Caribbean, in C. Aspalter and K. Teguh-Pribadi (eds.), Development and Social Policy, Routledge: Oxon, UK. ——— (2016b), Evaluating the Performance of Provident Fund Systems: The Case of Singapore, in C. Aspalter and K. Teguh-Pribadi (eds.), Development and Social Policy, Routledge: Oxon, UK. ——— (2017, forthcoming), Saving Lives Through Health Care Policy: A Developmental Social Policy Perspective, in C. Aspalter, R. Gauld, and K. Teguh-Pribadi (eds.), Health Care Systems in Developing Countries in Asia, Routledge: Oxon, UK. Aspalter, C.; Kim, J., and Park, S. (2009), The Welfare States in Poland, Czech Republic, Hungary and Slovenia: An Ideal-Typical Perspective, Social Policy and Administration,Vol. 43, No. 2, pp. 170–185. 12

Introduction

Aspalter, C. and Lai, O.-K. (2003),Welfare Capitalism in Japan, in C. Aspalter (ed.), Welfare Capitalism around the World, Casa Verde: Taoyuan, Taiwan. Aspalter, C.; Uchida,Y., and Gauld, R. (eds.) (2012), Health Care Systems in in Europe and Asia, Routledge: London. Aspalter, C. and Wang, D. (2006), The Austrian and the Swiss Welfare State System in International Comparison, Journal of Societal and Social Policy,Vol. 5, No. 2, pp. 25–50. Baldry, E. and Green, S. (2003), Indigenous Welfare in Australia, in C. Aspalter (ed.), Neoliberalism and the Australian Welfare State, Casa Verde: Taoyuan, Taiwan. Beck, U. (1992), Risk Society:Towards a New Modernity, Sage: London. ——— (1999), World Risk Society, Blackwell: Oxford. ——— (2000), Brave New World of Work, Polity: Cambridge. Bonoli, G. (2005), The Politics of New Social Policies: Providing Coverage Against New Social Risks in Mature Welfare States, Policy and Politics,Vol. 33, No. 3, pp. 431–449. ——— (2010), The Political Economy of Active Labour Market Policy, Politics & Society, Vol. 38, No. 4, 435–457. Bonoli, G. and Natalie, D. (eds.) (2012), The Politics of the New Welfare State, Oxford University Press: Oxford. Borzutzky, S. (2002a), Vital Connections: Politics, Social Security, and Inequality in Chile, University of Notre Dame Press: Notre Dame, IN. ——— (2002b), Chile’s Fully Funded System: An Analysis of Its Impact on the State and the Society, paper presented at the international conference Issues and Prospect of the Welfare Society in the 21st Century: Experience of the West and Experiment of the East, Seoul National University. CIA, Central Intelligence Agency (2015), The World Factbook, https://www.cia.gov. Dixon, J. and Scheurell, R. P. (eds.) (1994), Social Welfare with Indigenous Peoples, Routledge: London. Dostal, J. M. (2010), Nigerian Pension Reform 2004–2010: Great Leap or Inappropriate Policy Design, Korean Journal of Policy Studies,Vol. 25, No. 2, pp. 13–37. Esping-Andersen, G. (1990), The Three Worlds of Welfare Capitalism, Polity: Cambridge. ——— (1999), Social Foundations of Postindustrial Economies, Oxford University Press: Oxford. Farias, P.C.L.d. (2003), The Welfare State in Brazil: Evolution, Problems, and Trends of Social Policy, in C. Aspalter (ed.), Welfare States in Emerging-Market Economies: Case Studies from Latin America, Central Europe and Asia, Casa Verde: Taoyuan, Taiwan. Feldstein, M. and Liebman, J. B. (eds.) (2002), The Distributional Aspects of Social Security and Social Security Reform, University of Chicago Press: Chicago, IL. Goldsmith, M. and Kingfisher, C. (2003), The Welfare State in Aotearoa/New Zealand, in Christian Aspalter (ed.), Welfare Capitalism Around the World, Casa Verde: Taoyuan, Taiwan. Hobson, B. (1994), Solo Mothers, Social Policy Regimes, and the Logics of Gender, in D. Sainsbury (ed.), Gendering the Welfare State, Sage: London. Howard, Christopher (1993), The Hidden Size of the American Welfare State, Political Science Quarterly, Vol. 108, No. 3, pp. 403–436. ——— (1999), The Hidden Welfare State: Tax Expenditures and Social Policy in the United States, Princeton University Press: Princeton, NJ. Howard, Cosmo (2003), The Promise and Performance of Mutual Obligation, in C. Aspalter (ed.), Neoliberalism and the Australian Welfare State, Casa Verde: Taoyuan, Taiwan. Keersbergen, K.v. and Hemerijck, A. (2012), Two Decades of Change in Europe: The Emergence of the Social Investment State, Journal of Social Policy,Vol. 41, No. 3, pp. 475–492. Kim, J. (2008), Aging and the Welfare State in Switzerland, in A. Walker and C. Aspalter (eds.), Securing the Future for Old Age in Europe, Casa Verde: Taoyuan, Taiwan. Kim, S. K. and Ahn, S. H. (2003), The South Korean Welfare State: The Impact of Political Alliances on Welfare Politics, in C. Aspalter (ed.), Welfare Capitalism Around the World, Casa Verde: Taoyuan, Taiwan. Kingfisher, C. (1996), Women in the American Welfare Trap, University of Pennsylvania Press: Philadelphia. ——— (ed.) (2002), Western Welfare in Decline, Globalization and Women’s Poverty, University of Pennsylvania Press: Philadelphia. 13

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Korpi,W. and Palme, J. (1998),The Paradox of Redistribution and Strategies of Equality:Welfare State Institutions, Inequality, and Poverty in Western Countries, American Sociological Review,Vol. 63, pp. 661–687. Low, L. and Aspalter, C. (2003), The Welfare State in Singapore: “Welfare Without Redistribution,” in C. Aspalter (ed.), Welfare Capitalism Around the World, Casa Verde, Taoyuan, Taiwan. Manning, N. and Shaw, I. (eds.) (2000), New Risks, New Welfare: Signposts for Social Policy, Blackwell: Oxford. Midgley, J. and Aspalter, C. (2016), Developmental Social Policy:Theory and Implementation, in C. Aspalter and K. Teguh-Pribadi (eds.), Development and Social Policy:The Win-Win Strategies of Developmental Social Policy, Routledge: Oxon, UK. Mitchell, D. (1997), Reshaping Australian Social Policy: Alternatives to the Breadwinner Welfare State, Research School of Social Sciences, Discussion Paper, No. 55, Australian National University, Canberra, December. Novy, A. (2001), Vom Korporatismus zur Treffsicherheit: Der Wandel der Brasilianischen Sozialpolitik, in J. Jäger, G. Melinz and S. Zimmermann (eds.), Sozialpolitik in der Peripherie, Brandes & Apsel/Südwind: Frankfurt, Germany. Pascall, G. (2008), Gender Models and European Social Policy, in C. Aspalter (ed.), Understanding European Social Policy, Casa Verde: Taoyuan, Taiwan. Remington, T. F. (2015), Politics in Russia, Routledge: London. Rosenhek, Zeev (2003), The Welfare State in Israel, in C. Aspalter (ed.), Welfare Capitalism Around the World, Casa Verde: Taoyuan, Taiwan, pp. 216–239. Sainsbury, D. (1993), Dual Welfare and Sex Segregation of Access to Social Benefits: Income Maintenance Policies in the UK, the US, the Netherlands, and Sweden, Journal of Social Policy,Vol. 22, No. 1, pp. 69–98. ——— (1999), Gender, Policy Regimes, and Politics, in D. Sainsbury (ed.), Gender and Welfare State Regimes, Sage: London. Scheurell, R. P. (2003),The Welfare State in the United States, in C. Aspalter (ed.), Welfare Capitalism Around the World, Casa Verde: Taoyuan, Taiwan. Suter, C. and Budowski, M. (2001), Mexico und Costa Rica im Vergleich, in J. Jäger, G. Melinz and S. Zimmermann (eds.), Sozialpolitik in der Peripherie, Brandes & Apsel/Südwind: Frankfurt, Germany. Taylor-Gooby, P. (ed.) (2005), New Risks, New Welfare:The Transformation of the European Welfare State, Oxford University Press: Oxford. Teguh-Pribadi, K. (2016), The Extension of Social Security Systems: The Case of Indonesia, in C. Aspalter and K. Teguh-Pribadi (eds.), Development and Social Policy:The Win-Win Strategies of Developmental Social Policy, Routledge: Oxon, UK. ——— (2017), Health Care System in Indonesia, in C. Aspalter, K. Teguh-Pribadi, and R. Gauld (eds.), Health Care Systems in Developing Countries in Asia, Routledge: Oxon, UK. Walker, A. and Aspalter, C. (eds.) (2015), Active Aging in Asia, Routledge: London. WB, World Bank (2015), http://data.worldbank.org/indicator/SL.UEM.TOTL.ZS. WK, Wikipedia (2016), Statistics on the Gini Index of Wealth Distribution, https://en.wikipedia.org/wiki/ List_of_countries_by_distribution_of_wealth.

14

2 Ten worlds of welfare capitalism An ideal-typical perspective Christian Aspalter

The year of writing this article marks the 25th anniversary of Gøsta Esping-Andersen’s 1990 book The Three Worlds of Welfare Capitalism. More and more models of welfare, welfare regimes or welfare capitalism are being debated throughout ever more regions in the world. Hence, there is mounting need for extending the reach of the original work and theory of Esping-Andersen, in the only true original meaning of it, by looking at its very core, the ideal-typical perspective of welfare regime theory in the Weberian sense, as mentioned by Esping-Andersen in his 1987 article (see also Ebbinghaus, 2012; Arts and Gelissen, 2002, 2010; Aspalter, 2005a, 2006, 2011; Jaeger, 2006; Aspalter, Kim and Park, 2009). Typologies can be developed inductively by classifying a posteriori social patterns of a set of cases or deductively by defining a priori theoretical dimensions that serve as conceptual lenses or as a “yardstick” for empirical analysis.The heuristic value can thus move in two directions: ideal types serve as a theoretical tool to produce hypotheses for empirical testing, while in inductive empirical analyses, for instance, “cluster analysis” of real welfare regime worlds classifications reduce observable complexity to a few typical pattern that share more commonalities than difference. (Ebbinghaus, 2012: 2) We need to see that ideal-typical welfare regimes are not to be confused with real-typical welfare regimes (Aspalter, 2012), and both – to the same extent – have their justification of existence. We need both the myriad of real-typical welfare regime models and analyses and the ideal-typical welfare regime models and analyses. That is why I must fully endorse the ideal-typical welfare regime theory of Esping-Andersen. Many researchers are trying to carve out a little space for themselves, to find a way to contribute to the theory and realm of welfare regime modeling, the business of which has been perhaps best described by Peter Abrahamson’s article on the “Welfare Modelling Business” (1999).There are many more articles that left their imprint on the discourse and/or the development of the welfare modeling business (e.g. Pierson, 2000a; Hall and Soskice, 2001; Arts and Gelissen, 2002, 2010; Arcanjo, 2006; Esping-Andersen and Hicks, 2006; Ferragina and Seeleib-Kaiser, 2011; Powell and Barrientos, 2011), many of which however did not focus (e.g. Jaeger, 2006) on the value of, and important difference of their works and others to (in terms of real-typical versus 15

Christian Aspalter

ideal-typical perspectives) the monumental classification set in stone a quarter of century ago by Gøsta Esping-Andersen himself. What was his masterpiece? The reinterpretation of Richard Titmuss’s (1974) threefold classification of types of social policies? Certainly not. But, instead, it was the use of the method of ideal types and the idea that there are different types (models) of welfare state systems, or types of welfare capitalism. Esping-Andersen, being a world-acclaimed and leading professor in sociology (apart from the discipline of social policy) was and is certainly very familiar with the method of ideal types as used and proposed by Max Weber, one of the three grandmasters that developed and left their mark on sociology (apart from Karl Marx and Emile Durkheim). Esping-Andersen did mention the method of ideal types in the 1987 article, and his conclusions were already fully in place – the threefold classification of welfare states, with Scandinavia, Continental Europe and the Anglo-Saxon countries representing each particular model or world of welfare capitalism. The statistical findings later on in the 1990 book were used mostly for marketing of the idea that there are different worlds of welfare capitalism in a world that has been trained to expect and easily follow findings based on or supported by statistical findings, but perhaps not, not yet, or not so readily (quickly) the method of ideal types, which also integrates social indicators and statistical findings, but does not solely rely on them. The real world (the world of welfare capitalism) out there is more complex than simply two dimensions (e.g. decommodification and stratification) that would not work for more than three or so models, not for 10. What is the method of ideal types, exactly? Max Weber, for example looked at various models of bureaucracy. To be sure, any kind of model can be constructed with the method of ideal types. We can also look at models and types of gender policy or labor market policies, or at models or types of management styles, types of movie stars, types of novel characters, in any field or corner within all disciplines of social sciences. In this case, we apply the method of ideal types to identifying types of welfare capitalism (or welfare models, or welfare regimes). There are a couple of things that strike me thinking back to the summer of 1998, when I met Gøsta Esping-Andersen at a conference in the beautiful setting of National Chi Nan University and the mountain town of Puli, in Central Taiwan. Early on in the conference, the discussions of his theory (which he must have experienced and played through over a hundred times already at that point), came up the case of the Netherlands, and Esping-Andersen seemed to have actually complained about the lack of real powerful criticism that could have perhaps shaken or smashed his theoretical findings. He thus revealed that he was very well aware of the solid rock on which his theory stood on and was built upon: the method of ideal types (developed by Max Weber, a true genius in this regard) – and he knew that a theory can only be smashed or replaced by yet another theory, not by bits and pieces of criticism here and there. Today, I am writing here, not with the aim to smash the ideal-typical welfare-regime theory of Esping-Andersen, even though before I corrected the labeling of the Continental European Welfare Regime, by replacing the problematic label of “conservative welfare regime” (which is historically untrue after 1890, when the Christian Democrats of the Center Party started to determine government social security legislation in Germany; and the rise of the Christian Democrats in 1893 in Austria; see Wehler, 1977; Weidenholzer, 1985; Lampert and Bossert, 1992; Aspalter, 2001d) with the historically and currently correct label of “Christian Democratic Welfare Regime” especially based on the findings of e.g. Kees van Kersbergen (1994, 1995) – an author which, ironically, has been suggested to me, when talking about the case of Germany, by Gøsta Esping-Andersen himself, while we were having Chinese desserts in a little dessert shop in Puli (for further support for identifying a Christian Democratic Welfare Regime, see e.g. Huber, Ragin and Stephens, 1993; Woldendorp, Keman and Budge et al., 1998; Huber and Stephens, 1999, 2001; Ebbinghaus and Manow, 2001; Woldendorp, Keman and Budge et al., 1998). 16

Ten worlds of welfare capitalism

This chapter, like other works before (2005a, 2006, 2011), supports the overall work and theory of Esping-Andersen in the area of ideal-typical welfare regime analysis, which are different from those articles of mine that have indeed focused on real-typical welfare state regimes and models (e.g. Aspalter, 2001c, 2002a, 2002b, 2003a, 2008a; cf. also, 2001a and 2001b). Today, there is, it seems, more criticism than voices of support, and yet the theory of EspingAndersen is still the benchmark of almost all comparative talk and research in welfare state analysis. Esping-Andersen did venture into East Asia (1997), but only focused on the case of Japan, and was not too familiar with the rest of East Asia. I think he wanted (and still wants) others to carry on his theory when the time is ripe, or the theoretical and empirical analyses are ready to support a move beyond the identification of the original three worlds of welfare capitalism. In 2004, while walking with Paul Wildings at the Sun Moon Lake, again near Puli, I asked Paul if this welfare modeling is really so important, and he led me to understand that we cannot go without or around the important business of welfare modeling. Thereafter, I went back to Seoul National University at that time and started to apply the method of ideal types to the case of East Asia. Before that time, I refused to jump to premature conclusions and waited for the time to be ripe, and to find other research works that supported and pointed in the direction of identifying (or not) a new ideal-typical welfare regime in this part of the world. The outcome of this, the identification of the ideal-typical Pro-Welfare Conservative Welfare Regime in East Asia (see Aspalter, 2005a, 2006) has been published and repeatedly quoted, but the idea of what ideal types really are and what its differences are to real types (which lack any ideal-typical perspective) still needs time to catch on. Again, I have to think back to what Gøsta Esping-Andersen told me back in 1998, that his theory (or any theory, for that matter) took at least 10 years to be developed and to catch on from its very onset. Subsequently, I tried to clarify and develop further the application of ideal types, that is ideal-typical welfare regimes, with follow-up publications. Among them are (1) Central Eastern Europe (Aspalter, Kim and Park, 2009), where I and my colleagues identified based on earlier findings (see e.g. Busilacchi, 2008; Tomka, 2005; Cerami, 2007) that a rim of the most-western Eastern-Central European countries (e.g. Poland, the Czech Republic, Hungary and Slovenia) are indeed members of the Continental Christian Democratic Welfare Regime; and (2) Latin America (Aspalter, 2011), where I identified the fifth ideal-typical welfare regime (the Antiwelfare Conservative Welfare Regime), not long after having read the findings of Malloy (1991) on “regulated citizenship” and having come to understand its particular significance as one of the most important pieces in the puzzle of finding common key characteristics of a possible ideal-typical welfare regime in Latin America. In 2012, in the Routledge Handbook of the Welfare State (Greve, 2012), I wrote rather extensively about the differences between, and the advantages and disadvantages, of ideal-typical and real-typical methods in welfare regime analysis, and how and when to take advantage of both (Aspalter, 2012). To be sure, both provide synergetic value, but should be applied in different cases, and should not by any chance be confused with one another (Table 2.1). In the meanwhile, I have been waiting and thinking, wondering, reading and discussing with colleagues for quite a number of years about welfare state systems in other parts of the world – Africa and the Middle East, and of course South Asia, especially India. Recently, a new discussion about the Russian Federation and welfare regime analysis (and also what has been happening in terms of welfare regime analysis and welfare theory here in East Asia) (Aidukaite, 2007; Kainu, 2012; Kainu et al., 2016) has caught my attention, leading me to believe that it is time to carry the theory of Esping-Andersen further into new corners of the world and, in terms of ideal-typical welfare regime theory, into yet unexplored worlds of welfare capitalism. 17

Table 2.1 Advantages and disadvantages of ideal-typical and real-typical methodology compared (in general comparative social policy)

Purpose

Theoretical basis Major Advantages and Disadvantages

Real-Typical Method

Ideal-Typical Method

Focusing on the reality of welfare state institutions, their similarities and differences across nations; hereby researchers focus on the detail, on institutional differences rather than their similarities, for better clarity on “micro crossnational” level. Researchers’ own set of indicators/ system features Advantages: 1. delivers the detailed picture, 2. focuses on particular administrative and regulative set-up, and legal and administrative technicalities, i.e. this methodology is more sensitive to program-level and short-term developments, 3. enables further analysis of welfare state institutions, also when building on knowledge derived from ideal-typical theories and models, 4. enables greater clarity on national and policy level in welfare state comparison.

Focusing on average features of each regime cluster, it is used as a “yardstick” to facilitate broad cross-national comparisons; as a consequence, minor and some major differences are omitted for the sake of better clarity on the “macro crossnational” level.

Disadvantages: 1. the grand picture at international level may be unclear or contradictory, 2. some important similarities on international level, especially with regard to policy outcomes and strategies may be omitted (see e.g. the importance of the principle of functional equivalence), 3. the models set up change quickly over time, and often lack substance, i.e. a strong theoretical fundament.

The theory of Max Weber on “idealtypical models”* Advantages: 1. delivers the greater picture, 2. focuses on functional equivalences (different systems or system structure deliver the same outcome; for example: housing ownership is functionally equivalent to pension income), 3. provides a perfect starting point for further real-typical welfare state regime analysis, 4. enables greater clarity on international and global level of welfare state, comparison, i.e. it is very helpful when comparing a larger number of welfare state systems. Disadvantages: 1. details at national level may not appear, especially with regard to the institutional set-up of systems as well as administrative technicalities and legal provisions, 2. some important policy levels and areas may not appear, 3. the one or another country may not fit, or may not easily fit in an ideal-typical model (not every welfare state system has to be part of an ideal-typical welfare regime, some are atypical or simply drifting in between different welfare regimes, or changing from one to another).

Ten worlds of welfare capitalism

Representatives**

Real-Typical Method

Ideal-Typical Method

J. Midgley (1986), F. Castles and D. Mitchell (1991, 1992, 1993), E. Vogel (1991), F. Deyo (1992), S. Leibfried (1992), B. Deacon (1992), J. Lewis (1992), C. Jones (1993), A. Orloff (1993), E. Huber, C. Ragin and J. Stephens (1993), D. Sainsbury (1993, 1999), Ostner and Lewis (1995), M. Ramesh (1995, 2000, 2004), J. O’Connor (1996), M. Ferrera (1996), F. Castles and C. Pierson (1996), G. Bonoli (1997), H. Kwon (1997, 1999, 2005), R. Goodman, G. White and H. Kwon (1998), J. Woldendorp, H. Keman and I. Budge (1998), R. Goodin et al. (1999), I. Gough (2000, 2002), I. Holliday (2000), C. Aspalter (2001c, cf also 2001a, 2001b), M. Powell and A. Barrientos (2004), Y. Lee and Y. Ku (2007), C. Bambra (2005a, 2005b, 2007a, 2007b), J. Martinez Franzoni (2008), G. Pascall (2008), C. Mesa-Lago (2008), E. Huber and J. Stephens (2009), M. Abu Sharkh and I. Gough (2010), I. Gough and M. Abu Sharkh (2011), J. Pribble (2011), J. Hudson and S. Kühner (2011); Kennedy and Kodate (2015).

H. Wilensky and C. Lebeaux (1958), R. Titmuss (1974), G. EspingAndersen (1987, 1990, 1998a, 1999), W. Korpi and J. Palme (1998), P. Hall and D. Soskice (2001), A. Hicks and L. Kenworthy (2003), P. Abrahamson (2003, 2008), G. Wood (2004), C. Aspalter (2005a, 2006, 2011, 2012), G. EspingAndersen and A. Hicks (2006), J. Weidenholzer and C. Aspalter (2008), C. Aspalter, J. Kim and S. Park (2009), I. Gough (2013).

Note: * See e.g. Hekman (1983), Burger (1987), Kalberg (1994), Eliaeson (2002); Esping-Andersen (1987, but also 1990, 1998a); ** This is a demonstrative, not an exhaustive list.

Recently, I have discussed with and read the works from scholars, who researched and whose expertise was Africa (esp. Dembele, 2012; Miller, 2015), the Middle East (esp. Aldosary, Rahman and Munawer, 2008; Aldosary, Rahman and Shahid, 2008; Rosenhek, 2003; Gal, 2016), Cuba (esp. Mesa-Lago et al., 2003; Mesa-Lago, 2016) and the Russian Federation (esp. Dashkina, 2008; Avdeyeva, 2011; Kainu et al., 2016) in particular, and have updated my earlier research on India (about the new developments regarding universal primary education, the national program of universal food and universal provision of medicines, and universal employment program, there; Aspalter, 2016a). The research findings thereof have motivated me to make the next step, and apply ideal-typical welfare regime theory to other regions of the world, that were in the past left out – for the most part or entirely – from direct welfare regime comparison or general welfare state or social policy comparison in the international (yet Western Europe-centered) social policy arena (see Table 2.2). 19

Main Welfare Ideology

Based on initially social-liberal, later on, social democratic ideas of universal social insurance and universal social services; with special emphasis given to women’s employment in the public sector (“soft economy” jobs), social services are provided principally by the state, paired since recently also with asset- and means-tested social assistance systems, and there are more social services than in any other ideal-typical welfare state regime (the ratio between social services and benefits is about 50:50).

The Ideal-Typical Social Democratic WR in Scandinavia

1

Based on Christian democratic principles of subsidiarity and solidarity (developed by Catholic social teachings in the 1850s, by the bishop of Mainz, Freiherr Wilhelm v. Ketteler) and later on Social Democratic support of welfare state extension; mostly Bismarckian social insurance, social services are provided principally by nongovernmental organizations (NGOs) (esp. by church organizations), paired with asset- and means-tested social assistance systems.

The Ideal-Typical Christian Democratic WR in Most of Continental Europe

2

A predominant focus on asset- and meanstested social assistance and services, paired with limited coverage by mostly social insurance systems (either Bismarckian or Beveridgean), social services are provided principally by NGOs (especially by church organizations), and by and large an emphasis on punitive social policies.

The Ideal-Typical Neoliberal WR in Anglo-Saxon countries

3

Table 2.2 Ideal-typical worlds of welfare capitalism: mapping ideal-typical welfare regimes (in the Weberian sense)

Mostly conservative parties (or communist parties pursuing conservative real politics) reluctantly give in and invest heavily in health care, education and work-based social security systems (mostly social insurance in the north and more provident fund systems in the south), universal systems and universalization of existing systems are on the advance, social services are provided principally by NGOs (mostly, but not in all cases, church organizations), but in

The Ideal-Typical Prowelfare Conservative WR in East Asia

4

A combination of Christian democratic and neoliberal ideas, resulting into a new form of welfare model that is mostly conservative but antiwelfare in nature. Social insurance systems (mostly Bismarckian) are being used to support the upper and upper-middle classes and to shield them from redistribution, also a great degree of privatization of social security institutions (largely provident fund systems in pensions and private insurance in health care), paired with non-concerted set of individual welfare programs across the

The Ideal-Typical Anti-welfare Conservative WR in Latin America

5

Emphasis on: State Market Family Individual Degree of decommodification Degree of stratification Degree of individualization Countries/regions

Type of Social Rights

Strong Weak Strong Weak Medium Medium Low e.g. Germany, Austria, Netherlands, Belgium, France, Switzerland, Portugal, Spain, Italy, Poland, Czech Republic, Hungary, Slovenia

Low High

Sweden, Norway, Finland, Denmark, Iceland

Performative Social Rights

Strong Weak Weak Strong High

Universal Social Rights

US, Australia, New Zealand, Canada, UK

High High

Weak Strong Weak Strong Low

Clientelistic Social Rights

e.g. Mainland China, Hong Kong, South Korea, Japan, Taiwan, Thailand, Malaysia, Singapore

Medium Medium

Increasing Decreasing Strong Weak Medium-low

Productive Social Rights

most cases to a large extent funded by the government.

(Continued )

e.g. Chile, Argentina, Brazil, Uruguay, Mexico

Extremely high Medium

Decreasing Increasing Strong Weak Medium-low

board, especially AMTbased conditional cash transfer systems (the “bad” CCTs), social services are provided principally by NGOs (esp. by church organizations), and extremely high ratios of Gini index in terms of income and asset/wealth distribution. Regulative Social Rights

Main Welfare Ideology

Table 2.2 (Continued)

Extremely rudimentary (mostly Bismarckian) social insurance systems for a minute part of the population, paired with nonconcerted set of individual welfare programs across the board, a very high degree of fragmentation of social assistance and welfare programs, and in general the highest ratios of Gini index in the world in terms of family income distribution and asset/ wealth distribution.

The Ideal-Typical Ultra Rudimentary WR in Most of (esp. Former Non-British Colonies of) Africa

The Ideal-Typical Slightly Universal Rudimentary WR in South Asia

Slight echo of socialistic ideas being transformed into first national universal social welfare programs (food, medicine, employment programs, as well as education), very limited social security provision for a very small group of the population, paired with non-concerted set of individual welfare programs across the board; a strong role is played by NGOs in providing social welfare services and benefits and a very high degree of fragmentation of social assistance and welfare programs.

7

6

Mostly free provision of social services and extended systems of social insurance (Bismarckian systems) mostly for only one part of the population, integration of the main target population into the welfare state system, and marginal or nonexistent integration of the socially excluded parts of the society (accounting for the majority of the population in most cases), and as a result, high levels of inequality in terms of income and

The Ideal-Typical Exclusion-Based WR in Oil-Exporting Gulf States, plus Israel

8

Strong echo of socialistic ideas paired with social insurance systems, large home ownership rate, special attention to selected social policy fields, such as child and family welfare (prenatal family policies) and welfare to the elder population (esp. pensions) in the Russian Federation or health care in Kazakhstan, and a relatively limited role of NGOs in social service provision.

The Ideal-Typical Selective Rudimentary WR in Northern/Central Asia, & the Far East of Europe

9

Free universal provision of public social, close to 100 percent home ownership rate, relatively high social development outcomes (very low infant and under-5 mortality rates, lower than that of the US) and lowest levels of inequality in terms of income distribution, as well as asset/wealth distribution, in the world.

The Ideal-Typical Communist/Socialist Universal WR in Cuba

10

Extremely high Very low e.g. Angola, Mozambique, Namibia, DRC, Senegal, Cameroon, Côte d’Ivoire, Rwanda, Mali

e.g. India, Sri Lanka

Weak Weak Strong Weak Virtually non-existent

Extremely Rudimentary Social Rights

Very high Very low

Weak Weak Strong Weak Very low

Slightly Universal Rudimentary Social Rights

Kingdom of Saudi Arabia, Oman, United Arab Emirates, Qatar, Bahrain, Kuwait, Israel

Strong Weak Strong Weak High for a special group of the population only, non-existent or only marginally existent for the rest of the resident population. Very high Very low

e.g. Russian Federation, Kazakhstan

Very high High

Medium Weak Weak Strong Relatively high in certain areas (pensions, child welfare), but very low in other areas.

Selective Rudimentary Social Rights

Cuba

Very low High

Strong Weak Weak Strong Very high

Full Universal Social Rights

Notes: WR = welfare regime; findings are based on Dixon (1987, 2016), Esping-Andersen (1987, 1990, 1998a, 1999), Malloy (1991), Aspalter (2001d, 2003a, 2003b, 2005a, 2006, 2011, 2012, 2016a, 2016b, 2016c, 2016d, 2017), Farias (2003), Mesa-Lago et al. (2003), Mesa-Lago (2003, 2008, 2016), Rosenhek (2003), Abrahamson (2008, 2016), Aldosary, Rahman and Munawer (2008), Aldosary, Rahman and Shahid (2008), Dashkina (2008), Weidenholzer and Aspalter (2008), Aspalter, Kim and Park (2009), Cerami and Vanhuysse (2009), Dembele (2012), Cook (2013), Martínez Franzoni and Sánchez-Ancochea (2014), Craven (2015), Miller (2015), Gal (2016), Kainu et al. (2016), Borzutzky and Hyde (2016), Dostal and Naskoshi (2016) and Martínez (2016).

Degree of stratification Degree of individualization Countries/regions

Emphasis on: State Market Family Individual Degree of decommodification

Type of Social Rights

asset/wealth distribution among all people (residents) living/working in the country. Social Rights Based on Ethnic Origins

Christian Aspalter

It needs to be stressed that the ideal-typical method in comparative social policy is indeed “a method” and, for that reason, there is no reason not to apply this method to other parts of the world, other than Europe (Esping-Andersen, 1987, 1990, 1998a; Aspalter, Kim and Park, 2009), all of East Asia (Aspalter, 2005a, 2006), and Latin America. (Aspalter, 2011) The classification of ideal-typical welfare state system regimes is certainly subject to “more detailed-but-yet-general/ideal-typical” elaborations later on, by myself and hopefully by many other authors from any corner or all corners of the world that have been left out so far (for the most part or altogether) from welfare state system comparison. There may be, and it would surprise me to the utmost if there will not be, one or two, or a couple of more ideal-typical welfare regimes out there yet to be identified (e.g. among the island countries of the Caribbean or Oceania or elsewhere – the number of members does not necessary have to be large at all).

A comparative overview of different ideal-typical worlds of welfare capitalism around the world Scandinavia and Continental Europe – that is, the ideal-typical Social Democratic and Christian Democratic Welfare Regimes – have similar results when it comes to overall reduction of poverty and inequality. But, from a real-typical perspective, there are still vast differences even within the Social Democratic Welfare Regime, as Denmark and Sweden exert, for example, the highest levels of inequality in terms of asset and wealth distribution, whereas Norway and Finland have achieved the lowest levels of inequality in both asset and wealth distribution and family-income distribution. No doubt, from a real-typical perspective – that is, if one applies the real-typical method in welfare state system comparison – there are differences among Continental Christian Democratic welfare state systems. Especially still quite different is the case of Southern Europe, and to a greater or lesser extent also countries in Eastern Central Europe (depending on which country one focuses). Welfare state systems in Southern Europe pay more attention to pensions, in terms of welfare state expenditures, and have by and large established universal health care systems. From the ideal-typical welfare regime theory point of view, Southern European welfare state systems are members of the same family of welfare state systems, just like other countries in Continental Europe; that is, they are members of the ideal-typical Christian Democratic Welfare Regime. From a historical and ideal-typical perspective, the Southern members of this welfare regime are just behind in time – that is, they have not had time enough yet to mature – when it comes to the construction of welfare state systems (see Abrahamson, 2015, 2016; Pierson, 2003). Welfare state systems in Eastern Central Europe still reveal better gender equality and lower levels of non-governmental organization (NGO) involvement in social service provision (as this is a remaining outcome from the old communist welfare state arrangement) (see Aspalter, Kim and Park, 2009; Cerami and Vanhuysse, 2009; Cook, 2013), and they still are marked by the highest home ownership rates in the world (of around 95%), apart from Cuba and Singapore. But from an ideal-typical perspective, major deviations here and there are not only allowed, but wanted – in order to come to larger conclusions and see the picture at large, over many dozens of countries, or hundreds of countries if necessary (as in our case here, where we talk about the world, or really the most of it, as such). With regard to Anglo-Saxon countries, or the ideal-typical Neoliberal (Liberal) Welfare State Regime, there are also great differences in between each country in concern, among a rather 24

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small number of countries (five).The National Health Service (NHS) in the UK is a completely different design and strategy of the government when compared to the Patient Protection and Affordable Care Act in the US (or Obamacare as it is commonly known). Canada is very different in health care and education from the US. Australia, with the model of mutual obligations and severe, stringent application of asset and means-tested social assistance and services, and New Zealand with universal pensions, are again very different from a real-typical perspective compared to the rest of the group (see Castles and Mitchell, 1991, 1992, 1993; Aspalter, 2001c; Castles and Pierson, 1996). Thus, the only way to categorize the Neoliberal/Liberal Welfare State Regime is by using the ideal-typical method. Any full-fledged real-typical comparison must come to a different conclusion (emphasizing the vast differences, too many of them and too large each of them) than that these five welfare state systems are members of the same welfare state regime (in a real-typical perspective). But, from an ideal-typical perspective, one (and barely that is) can say that there is a neoliberal consent among all those five countries, and their main social policy making bodies, while also referring to the “principle of functional equivalence” (i.e. different programs and system designs of social security systems can lead to the same or similar social policy outcomes, strategies, and/ or philosophies in social policy making). Otherwise it is not possible to classify these countries into one welfare regime, even when allowing one or two major differences here and there: there too many great deviations or opposite approaches as in, for example, health care in the UK or Canada, or pensions in New Zealand. In East Asia (including Northeast and Southeast Asia), there are also differences, but only in the type of social security system chosen to deliver and guarantee social security. But, due to the “principle of functional equivalence” (see Aspalter, 2005a, 2006), one can still conclude East Asian welfare state systems are by and large members of one distinct family of welfare capitalism or welfare state systems. In social security provision, functional equivalence tells us that there is not much difference between the welfare effects (i.e. welfare outcomes) of this welfare state system, and the overall strategy of government (their welfare philosophy and social policy strategy) if, for example one looks at the functions of (publicly constructed and privately owned) public housing units, bank accounts of provident fund systems or entitlements of pension insurance systems – as long as redistribution of general revenue is guaranteed across the board to a similar/comparable degree (through direct public subsidies of health care services, subsidies to public and private educational institutions from kindergartens to universities, etc.). Welfare state systems of the Pro-Welfare Conservative Welfare Regime in East Asia are typically marked by either provident fund systems or Bismarckian social insurance schemes pertaining to old-age income maintenance, and increasingly so also either Beveridgean health insurance, semi- or quasi-universal health insurance systems, or direct public provision and/ or direct public subsidies to health care providers, paired with (in general) passive labor market policies, and asset- and means-tested (AMT) social assistance programs. There is a great emphasis on social investment in the areas of both health care and education (with strong subsidies of both public and private educational institutions). Sometimes this social investment paradigm extends to publicly constructed and/or subsidized housing units (e.g. through mortgages with preferential low interest rates), as well as public financial support of private social service provision. Hence, NGOs play a large role in social service provision, with also, at times, large direct financial support from the government (e.g. Hong Kong and Mainland China) (see Aspalter, 2006; as well as Ramesh, 2000, 2004; Leung and Xu, 2015). See Box 2.1. 25

Christian Aspalter

Another example of how the “principle of functional equivalence” in social policy needs to be understood One can use his or her monthly pension to get a mortgage and buy a house, and so one can use the savings of his or her mandatory provident fund accounts to do the same, or apply for and to move into publicly subsidized/constructed public housing units, which is paid by taxation, all of which are deducted from, for example salaries, and end up providing a roof for oneself and one’s family. Only the route which the money has traveled is different here; it ends up in the same place for the same purpose/function.

In Latin America, there are vast differences, too, from one welfare state system to another (as there are between Germany and Hungary, Luxembourg and Switzerland, etc.). Being raised and educated in Europe, it is hard for me to see that Costa Rica, Uruguay or Brazil would resemble any kind of “social democratic” welfare model. Yes, Costa Rica and Uruguay to some extent stand out positively (see Huber, 1996; Martínez Franzoni and Sánchez-Ancochea, 2014), but is fully accounted for in terms of the (allowed for/wanted) variability within ideal-typical welfare regimes. Latin American welfare state systems reveal the highest levels of inequality regarding family income and asset/wealth distribution in the world, only to be negatively outperformed by mostly countries in Africa. Social assistance programs are highly fragmented, and amount only up to 0.5 percent of GDP (Aspalter, 2014a, 2016b, 2016c); hence they exert only a relatively very limited effect on overall redistribution. The larger share of welfare budgets is used in fact for the middle classes, on social security for formal sector workers and especially pensions (and here again mostly government officers).Welfare state systems in Latin America are typically regressive in terms of welfare redistribution, meaning that the better off benefit more from the welfare state, and the worse off are being kept at bay (being “controlled” or “managed,” so to speak). In the case of Brazil (see Aspalter, 2016b), one needs to look closer, and beyond the political affiliation of presidents (not just looking at whatever political party is in power, and whatever name it carries). One needs to look at social policy actions and poverty and inequality levels on the ground, not at principles and rhetoric delivered in public addresses and speeches. Brazil is a core model country of the ideal-typical welfare regime model in Latin America, which Aspalter (2011) identified as the Anti-welfare Conservative Welfare State Regime. Of course, there are countries that are behind in terms of welfare state development, timewise, and others will not catch up at all, or not much, to the rest of the members of the ideal-typical Latin American Anti-welfare Conservative Welfare State Regime (see Abrahamson, 2016). But this is up to researchers to find out and evaluate every case in concern (in each single country in Latin America). Lead countries here are certainly Brazil, Uruguay, Argentina, Chile and Mexico, to name the most well-known and important cases in point. India and Sri Lanka, for example, left behind a realignment to neoliberalism in the 1990s and moved on to include more and more universal health care (free, yet limited, vital medicines in India, and free public health care in Sri Lanka), universal primary education (in India), universal employment programs (in India) and universal food programs (the Public Distribution System that provides free essential foods for the entire population and Mid-day Meal Program for school children in India) (see Aspalter, 2016a). The ideal-typical Slightly (but growingly so)

26

Ten worlds of welfare capitalism

Universal Rudimentary Welfare State Regime in South Asia is, in addition, marked in general by very limited social security provision for a small part of the urban population, which has been highly privileged. Government institutions themselves are also highly fragmented, which leads often to policy deficiencies, failures and lack of efficient and effective policies on the ground (Aspalter, 2003b). Welfare programs (especially social assistance and programs for the poor) are highly fragmentized and decentralized (Kurz, 2001; Singh, 2013; Aspalter, 2002c, 2003b, 2016a) and resemble politicians’ needs to leave a fingerprint here and there and to gain political advantage points in general and local elections alike. In this ideal-typical welfare regime, NGOs pick up a great share of responsibility to deliver social services and benefits. These last two traits are also common in Latin America (the Anti-welfare Conservative Welfare Regime) and Africa (the Ultra Rudimentary Welfare Regime) (for the impact of politics, elections and political will, see also Lindert et al., 2007; Adesina, 2009; Ferreira and Robalino, 2010; Lindert and Vincensini, 2010; Layton and Smith, 2011; Niño-Zarazúa, 2011). In Africa, too, NGOs deliver the lion’s share in welfare delivery with a large share of international NGOs (INGOs) and great dependency on international aid. Social security is highly limited to a tiny fraction of the population (mainly through Bismarckian social security systems) (Dixon, 1987; Miller, 2015), that is, the privileged urban middle class and/or government officers. Government institutions are in general weak and lack the desire to implement social policies (see Eckert, 2001; Adesina, 2009). A high fragmentation of conditional cash transfer programs and welfare programs in general, for example is a marker for the Latin American, South Asian and African ideal-typical welfare regimes. Africa, however, has also the highest levels of mortality in the world, paired with the highest levels of inequality (both income inequality and asset/ wealth inequality). That makes it stand out clearly, and very negatively so, from other types or grand models of welfare capitalism or welfare regimes in the rest of the world, when seen from an ideal-typical perspective (see Miller, 2015; Dembele, 2012). Members of the Ultra Rudimentary Welfare Regime in most of Africa lack large-scale universal social policy programs – as they have been implemented in, for example India over the last decade. African countries, across the board, reveal a great deal of fragmentation of welfare programs, even within NGOs/INGOs themselves (Adesina, 2009). Certainly, richer Middle Eastern countries, especially the gulf states (the Kingdom of Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Kuwait and Oman) form another welfare regime cluster, the Exclusion-Based Welfare Regime. They have relatively highly developed, predominantly Bismarckian social security systems.These countries have already started to work closely together in social security administration at a more institutional level than the European countries, for example, where it is not possible to collect contributions for a social insurance member of one country in another (but it is possible in the Gulf States). The Gulf States are characterized by mature Bismarckian social insurance systems, and, in general, extremely generous welfare benefits to the local (ethnically local) population only (Craven, 2015). Somehow Israel, even being for sure a great outlier in this group of countries (also in ideal-typical terms) (see Gal, 2016; Rosenhek, 2003), when it comes to social exclusion of certain ethnic social groups, Israel’s welfare state arrangement is very much in line with that of other rich Middle Eastern countries (now only focusing on the six Gulf States, not including Iran). Israel’s membership here in this ideal-typical welfare regime can – and hopefully will – be debated (as one can and should debate any regime membership, here or there). Former Soviet countries need to be analyzed a great deal further by international social policy experts. But when taking Russia as the key country in concern, it is already clear that we have strong case for a new ideal-typical welfare regime model – the Selective Rudimentary Welfare

27

Christian Aspalter

Regime. Some elements of the former state-centered welfare state system have remained, while others have become victims of privatization, marketization and decentralization (to a lesser degree so in Russia, than Kazakhstan, for example). Due to power politics and politics of legitimization (see e.g. Putin, 2012; see also Cook, 2007a, 2007b, 2010, 2013) and as a matter of guaranteeing national security (Heusala, 2012), certain key areas of the welfare state system have either managed to stay prevalent and received continuous support (like pensions) or new areas of social policy arose (like pro-natalist family policies), amid a climate of neoliberalism that took charge at the key welfare arrangements of post-communist countries in the region (see Kainu et al., 2016; Avdeyeva, 2011). While Russia focuses for example on pensions and child welfare benefits, Kazakhstan also has invested a great deal (see Aspalter, Teguh-Pribadi and Gauld, 2017) in its universal public health care system, and thus lowered mortality rates. All major former Soviet countries stand out in terms of very low, especially male, life expectancy (due to the high consumption levels of alcohol and tobacco products). Another special trait of these welfare state systems in general (i.e. when seen from an ideal-typical perspective) is the limited role of NGOs, which for a while in Russia could rely on the outside help from INGOs (Dashkina, 2008). This trait is also common across all former communist countries, including China (where the government, however, now more and more directly finances non-governmental welfare agencies, following the example of Hong Kong) and Cuba. Cuba is the only country left from the whole of the communist bloc from the days of the Cold War (Mesa-Lago et al., 2003; Mesa-Lago, 2016, see Dixon, 1992) where we still can find universal health care, universal education, universal home ownership, universal pensions and other universal social services. It is the last country in the Communist/Socialist Universal Welfare Regime. Cuba exerts a great mark on the worlds of welfare capitalism in global comparison, as – even with the trade sanctions in place for many decades and currently still very low levels of economic development – Cuba has achieved lower child mortality and infant mortality rates than, for example the US, one of the richest countries on earth (Aspalter, 2017). That is why I would like to keep Cuba as a principle case in point for further comparative social policy research, also and especially in the welfare state regime modeling business. In the past, and currently ever more so, developing countries resorted to the principle of universalism (and not “communism” at all) when it comes to refashioning their particular type of welfare capitalism, as modified and applied in, for example Sri Lanka, Kazakhstan, Thailand, Indonesia, Costa Rica and also highly capitalist Hong Kong (where state subsidies finance about 95 percent of social services, along with the overwhelming part of total funding for health care and public and private educational institutions) (Aspalter, 2002b).

Developmental Social Policy (DSP) and worlds of welfare capitalism There are many normative social policy theories out there; many are ideological or politically based (see Abrahamson, 2016). DSP is not one of them. DSP is based on empirical evidence from dozens of countries over many decades of experience. Advocates of DSP look at what works on the ground and what does not, or what is not so good. The value of any normative social policy theory is how much can it give good advice, which is not only good in the eyes of the beholder, or one’s political candidate or political leader, or members of any political party in concern. The value of any theory is how useful it is, for everybody. DSP is devised as a universal theory (see Midgley, 2002) that works in all places, at all times, and it works for any welfare recipient, social insurance beneficiary, any member of any type of provident fund system, and the like. 28

Ten worlds of welfare capitalism

The more money that can be saved by switching from one social security system to another, while keeping up with the welfare function for all citizens to at least the same, if not higher degree, the better the advice is that is given by any normative social policy theory. The more a social policy area or program can increase its effectiveness (that is, increasing people’s welfare and life quality and, more importantly, decreasing people’s diswelfare, such as disease burden, mortality rates, crime, abuse, neglect, discrimination, social exclusion) by switching to another strategy or policy directive, or by redesigning its social security system(s), or by adding new techniques to or dropping one or replacing one particular element of an existing social policy or program, the better again is the advice given by this particular normative social policy theory.

Being a universal theory, DSP has looked at successful policy experiences over the past decades from around the world and assembled them into easy-to-understand policy recommendations that by and large have one overarching objective – “to save people’s lives” – from poverty, physical and mental disease, avoidable accidents, unnecessary premature death and so forth (Aspalter, 2017). So what are some of those directives? First, the government has the duty to intervene to help people and to help society. Second, the government needs to apply a great deal of universalism in arranging overall social welfare policy and social security systems (Midgley, 1995, 1996, 1999, 2003, 2008; 2013; Midgley and Sherraden, 2000; Midgley and Tang, 2001; Townsend, 2002; Mkandawire, 2005; Adesina et al., 2006; Utting, 2006; Adesina, 2007, 2009; Aspalter, 2014b, 2015, 2016c, 2017; Kwon, 2014). Third, the government needs to invest in people’s individual human, social and cultural capabilities/capital (i.e. societal human capabilities/capital) (Aspalter, 2005b, 2007a, 2007b, 2008b, 2010; Midgley and Aspalter, 2016). Fourth, the government should also promote people’s personal savings and asset accumulation, for example through provident fund systems or other savings schemes, appropriate housing policies that aim at the highest rates of home ownership, as well as micro-saving and micro-credit systems wherever possible (see Midgley, 2013; Aspalter, 2016d). Fifth, the government needs to add new arms (wings) to the traditional welfare state in place, by adding, for example: cultural social policy, which focuses on cultural activities to make social policy (not cultural policy), that is, to improve people’s social networks, mental happiness, feeling of self-worth, etc. In doing so, DSP is advancing social policy to include a new level of welfare state activity, that is, social policy marketing, which is the use of old and new (innovative) ways of doing social policy by changing (altering) individual behavior. Especially a great deal of future potential here would involve the use of social policy marketing in health policy and health care policy, including mental health policy and mental health care policy – for example, by increasing personal hygiene, including washing hands in developing countries’ context or improving mouth hygiene in developed and developing countries alike; by changing food intake, less red meat, more uncooked/non-fried vegetables; by decreasing overall alcohol consumption, for example by introducing alcohol-free beer on a mandatory basis in all bars, restaurants and supermarkets; by decreasing the consumption of tobacco products; by educating people about health risks and loss of social support and life quality due to mood disorders, or anger or anxiety problems, how to treat and take care and live with them and so forth. 29

Christian Aspalter

Furthermore, DSP’s new social policy marketing method can and should also be put to practice when it comes to (1) changing consumption and savings behavior/patterns; (2) increasing levels of social and cultural participation; (3) increasing social inclusion of disadvantaged social groups; (4) avoiding work, traffic and leisure accidents; (5) encouraging family formation and partnerships (of any kind and particular type); and (6) encouraging societal fertility, for a sustainable societal (and economic) development (not to mention to sustain the future of pay-as-you-go pension insurance, health care insurance and long-term care insurance systems) in countries with fertility rates far below replacement level (especially in Europe and East Asia). Sixth, the government has to avoid “poverty traps” and “savings traps” that are caused by any form of asset- and means-tested (AMT) social benefits and social services, which leads over time inevitably to more rather than less poverty – by replacing all those AMT benefits and services and all AMT elements in conditional cash transfer systems (CCTs) (Aspalter, 2014a, 2016b, 2016c) with universal benefits and services (UBS) and non-economically targeted benefits and services (NETs). NETs, instead, are based on age, gender, ethnic origin, labor market status and/ or performance, school attendance and/or school performance, attendance of seminars, attendance of public health care facilities for giving birth and health care check-ups, the registration of births and/or application for an ID card for each newborn baby, number of children in the household, square meters of living space for each member of the household, availability of running water and individual toilets for each household, the availability of a fixed roof and/or geographical targeting, and so forth – and, very important, any combination thereof. Seventh, the government has to avoid mandatory private social insurance systems, which benefit first and foremost in the case of mandatory private health insurance, e.g. private insurance companies, pharmaceutical companies, private hospitals and clinics, law firms and marketing firms (apart from political candidates supporting this kind of social security system). Health insurance (as in the case of the Affordable Care Act, or Obamacare, in the US) is always good to have; it is much better than having no insurance coverage. But, having to pay close to twice the amount of money as with any conventional social insurance (as we find them in Sweden, Germany, the UK or Japan) is not at all a good thing. When we compare 18 (and soon a wobbling 21) percent of GDP spent on the American health care system, with 10–11 percent spent in Sweden, Germany, the UK or Japan, this is not good at all. It is worse even when we compare the 18 (soon to be 21) percent of GDP the American health care system costs (costs are the real problem here, not coverage, not treatment, not technology, etc.) with the breathtakingly low 4.6 percent of GDP spent by Singapore on its health care system (see Aspalter, Uchida and Gauld, 2012; Aspalter, Teguh-Pribadi and Gauld, 2017). These numbers are apolitical and speak for themselves. It is a crime first and foremost to rob so many contribution dollars from ordinary folks and give it to rich insurance companies or other corporations, their managers, rich private hospitals and their administrators, and ever-richer lawyers, political lobbyists, political candidates and their super PACs. And, by the way, it is a crime against the US, as it is losing its ability not only to reduce its staggering national debt and go virtually debt-free in a matter of only a dozen or so years (if there would be another social security system that also covers all of the population, one like the ones in Singapore, Japan or Europe). The Affordable Care Act weakens the country socially, economically and also militarily. I wonder why there are no voices coming out of the American military and security agencies as to the issue of health care costs and different options of how to employ mandatory health care provident fund systems (which may be subsidized for the poor in the beginning years), or Beveridgean or Bismarckian health insurance, instead of an 30

Ten worlds of welfare capitalism

extremely expensive mandatory private health insurance system (as they have already issued grave concerns about the aging of society and its impact on national security, to name another example here). President Obama certainly had it right when he saw the need for health insurance or some kind of health care security system for all, but either he had been consulted badly or not at all when it comes to health policy and health care policy – and/or he simply had looked into his main sources for electoral funding. DSP supports President Obama’s care for an idea for a health care security system for all (which desperately needs to be complemented by an insurance that insures people against long-term care needs for all citizens, see e.g. Fernald, 2015), but not this current system based on mandatory private health insurance (Obamacare). He could have so much more money (literally trillions of dollars) to give to the poor people of the US, if he only would switch to another health insurance or health care security model (like provident fund systems) – as well as trillions of dollars that are desperately needed to pay back American debts.

Sweden, Italy and China have switched partially (and are set to do so increasingly over time) from their Beveridgean and Bismarckian pension insurance systems to defined contribution– based (DC-based) provident fund systems already, which are nothing more than mandatory individual savings accounts. A good choice would be to – like in Singapore – add special incentive systems, such as (1) top-up schemes (where the government financially rewards those who help family members by transferring money to their provident fund accounts), which also facilitate redistribution from the government (general taxpayers) to the poor or needy families/ individuals, and (2) voluntary public insurance components (e.g. against the loss of the breadwinner, or pension insurance, etc.). It is not too late for the US to switch Obamacare (a mandatory private insurance system based on penalties with a complex system of regulations stretching over thousands of pages) into something efficient – the judgment of what is efficient and what is not, or how much, is only made by comparison to other countries (see Aspalter, 2012; Aspalter and Teguh-Pribadi, 2016; Aspalter, Teguh-Pribadi and Gauld, 2017).

Conclusions and outlook Is it a dream to increase the efficiency and the effectiveness of welfare state systems all over the world? I suppose not. There will be pioneers and laggards, just as with the early beginnings of welfare state systems in the late 19th and early 20th centuries. Even at that time, the pioneers were spread out all over the world; New Zealand and Argentina, as a matter of fact, were pioneers in modern welfare state development. As such, we may expect other countries, the ones we have not paid attention to before, in comparative and mainstream welfare state literature, that will lead the way into the future, that of a post-industrial efficient and effective welfare state. Due to the slowing rates of return (i.e. GDP growth), economies of post-industrial societies will have comparatively lesser means available for taxation or social security contributions. Given the fact of societal aging (many countries especially in Europe and Asia will relatively soon become super-aged societies) and the (for the overwhelming part) long-term belowreplacement fertility rates of these countries, one looks at a double squeeze for the financing of welfare state systems. 31

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The bases for taxation and social security contributions are dwindling, and the needs for welfare and social security benefits and services are set to continue to grow in the years and decades ahead, as the share of the working-age population is shrinking permanently and so is the share of the active labor force (that means, long-term unemployment is here to stay, if we do not apply Keynesian-style labor market programs, i.e. direct public employment security systems, like in the case of India, for example). The rise of a more and more irregular, short-term or part-time, as well as non-salaried (work contract–based, commission-based, royalty-based, etc.) workforce, and regular full-time employment at minimum wage levels, will further crowd out the ability of the welfare state and social security systems to collect sufficient contributions and taxes. At the same time, the incentives of the workforce (especially of the lower and middle working classes) to work in the formal labor market and contribute more (e.g. to pay-as-you-go pension, health care and long-term care systems) are drastically shrinking, as it does not (it will less and less so) matter much if one pays low contributions for 40 years, or is simply unemployed (or travels or works abroad); one’s retirement income will be similarly equally low, be it very low pension insurance benefits or social assistance benefits, both of which will be very close to the bare existence minimum (i.e. in the years 2030, 2040, 2050 and thereafter) (see also Kim and Hießl, 2016).

And, as a consequence of these forces, the financing of welfare state systems is being put into question (see Pierson, 2001a, 2001b). Even though at the moment the trend is going up in terms of global welfare state system financing, those countries with a shrinking active labor force and a high share of aged population and low fertility rates will reach a ceiling of what is possible in economic terms. The case of Argentina in the 1990s made that very clear, once again, with drastically falling GDP rates (and riots on the streets), when social security contributions reach, e.g. 55–65 percent of payroll (not including individual income taxation, that is). Then, people and companies simply stop working, investing, producing and, as a result, stop paying taxes and contributing to social security. DSP looks at empirical outcomes and is by its very nature non-political; that means no part of the political spectrum is secure from criticism – if some part or parts (or all parts) of the outcomes are not favorable or less favorable than other available social policy options, or social program options. Saving costs (money) and maximizing welfare (well-being) outcomes (more and better quality of health and mental health care services, health promotion and disease/ accident prevention, universal social security coverage, etc.) will be crucial for the survival and proper functioning of welfare state systems down the road in the 21st century. It may take decades to reform the existing wings of today’s welfare state systems, and to add new wings and new methods to apply social policies and to achieve better social welfare outcomes (see e.g. Taylor-Gooby, 2001, 2005a, 2005b; Esping-Andersen, 2002; Walker, 2002, 2008; Bonoli and Natali, 2012; Walker and Aspalter, 2015). It will be quicker in countries with fewer path dependencies (see Pierson, 1994, 1996, 2000b; Palier and Bonoli, 1999) – those who have a clean slate, in general. But, first and foremost, it is “the political will” that counts (Konkolewsky, 2009, 2010; Adesina, 2009).That is, the political will of parties or state leaders, regional and local leaders alike, that will decide when a country (or province or city) starts stepping in the right direction, one small step at a time, a big step at a time or more or less all at once. By looking at different worlds of welfare capitalism (or welfare regimes) – 10 different worlds of welfare capitalism or ideal-typical welfare regimes so far – one can see and grasp the trends 32

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of welfare state systems that are going on today and in the future. New advances in social policy are fast changing the landscape of social welfare, particularly in the Slightly Universal Rudimentary Welfare Regime (South Asia) and the Pro-Welfare Conservative Welfare Regime (East Asia). There is a lot of room for progress in the Western World (Liberal, Christian Democratic and Social Democratic Welfare Regimes), the Exclusion-Based Welfare Regime (in rich Gulf States, plus Israel), the Selective Rudimentary Welfare Regime (in former Soviet Republics) and, of course, the Ultra Rudimentary Welfare Regime (in most of Africa). Hopefully, the end of sanctions (that is in near sight) and local economic reforms will also improve the health care infrastructure, education and housing infrastructures, and the benefit levels of social security payments in Cuba with its Communist/Socialist Universal Welfare Regime. From a historical perspective, trends in social policy are “not linear” – and so is the history of welfare state systems. Population aging, low fertility and low rates of returns (GDP) of postindustrial countries are here to stay and either push away or knock off current welfare state development to a new more sustainable path. A number of developing countries, however, are learning from the mistakes of older, postindustrial societies and to develop their welfare state systems according to their current or future needs (e.g. more rapid aging in China, or more political needs of legitimization in Russia or democratic competition in Brazil, India or Indonesia), and show signs, here and there, to be early birds when it comes to implementing new social policy methods (see e.g. Aspalter, 2014b; Walker and Aspalter, 2015; Aspalter and Teguh-Pribadi, 2016), and thus addressing the impacts of demographic changes, a changed electoral environment, as well as changing economic opportunities. But some developed welfare state systems already reveal clear signs of change, on a program level, as well as on a policy and welfare state system level (see the chapters in this volume, and e.g. Abrahamson, 2010). For that, DSP offers crucial directives for governments, scholars and students of social policy to apply, to explore and to develop them further. The essence of DSP hence is being a particular/specified set of what has been referred in general to as “transformative social policies” (see Mkandawire, 2004, 2007; Kwon, 2005; Utting, 2006; Adesina, 2007, 2009).

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Midgley, J. (1986), Industrialisation and Welfare: The Case of the Four Little Tigers, Social Policy and Administration,Vol. 20, No. 7, pp. 225–238. ——— (1995), Social Development:The Developmental Perspective in Social Welfare, Sage: London. ——— (1996), Toward a Developmental Model of Social Policy: Relevance of the Third World Experience, Journal of Sociology and Social Welfare,Vol. 23, No. 1, pp. 59–74. ——— (1999), Growth, Redistribution and Welfare: Towards Social Investment, Social Service Review, Vol. 77, No. 1, pp. 3–21. ——— (2002), discussion with, at an international symposium at the School of Social Welfare, University of California at Berkeley, December 11–13. ——— (2003), Poverty and the Social Development Approach, in K. L. Tang and C. K. Wong (eds.), Poverty Monitoring and Alleviation in East Asia, Nova Science: New York. ——— (2008), Developmental Social Policy:Theory and Practice, in S. Singh and C. Aspalter (eds.), Debating Social Development, Casa Verde: Taoyuan, Taiwan. ——— (2013), Social Development:Theory and Practice, Sage: London. Midgley, J. and Aspalter, C. (2016), Developmental Social Policy:Theory and Implementation, in C. Aspalter and K. Teguh-Pribadi (eds.), Development and Social Policy:The Win-Win Strategies of Developmental Social Policy, Routledge: Oxon, UK. Midgley, J. and Sherraden, M. (2000), The Social Development Perspective in Social Policy, in J. Midgley, M. B. Tracy, and M. Livermore (eds.), The Handbook of Social Policy, Sage: London. Midgley, J. and Tang, K.-L. (2001), Social Policy, Economic Growth and Developmental Welfare, International Journal of Social Welfare,Vol. 10, No. 4, pp. 242–250. Miller, C. (2015), Social Welfare in Africa: Meeting the Needs of Households Caring for Orphans and Affected by AIDS, http://www.unicef.org/spanish/infobycountry/files/Social_Welfare_in_Africa_-_Meeting_ the_needs_of_households_caring_for_orphans_and_affected_by_AIDS.pdf. Mkandawire, T. (ed.) (2004), Social Policy in a Development Context, UNRISD/Palgrave: Basingstoke. ——— (2005), Targeting and Universalism in Poverty Reduction, Social Policy and Development Programme Paper No. 23, December, UNRISD, Geneva, Switzerland. ——— (2007), Transformative Social Policy and Innovation in Developing Countries, European Journal of Development Research,Vol. 19, No. 1, pp. 13–29. Niño-Zarazúa, M. (2011), Mexico’s Progresa-Opportunidades and the Emergence of Social Assistance in Latin America, Brooks World Poverty Institute, University of Manchester. O’Connor, J. (1996), Understanding Women in Welfare States, Current Sociology,Vol. 44, No. 1, pp. 1–12. Orloff, A. S. (1993), Gender and the Social Rights of Citizenship, American Sociological Review, 58. Ostner, I. and Lewis, J. (1995), Gender and the Evolution of European Social Policies, in S. Leibfried and P. Pierson (eds.), European Social Policy, Brookings Institution, Washington, DC. Palier, B. and Bonoli, G. (1999), Phénomènes de Path Dependence et Réformes des Systèmes de Protection Sociale [Phenomena of Path Dependency and Reforms of Social Protection Systems], Révue Française de Science Politique,Vol. 49, No. 3, pp. 399–420. Pascall, G. (2008), Gender Models and European Social Policy, in P. Abrahamson and C. Aspalter (eds.), Understanding European Social Policy, Casa Verde: Taoyuan, Taiwan. Pierson, C. (2003), “Late Industrialisers” and the Development of the Welfare State, paper, UNRISD, Geneva, Switzerland. Pierson, P. (1994), Dismantling the Welfare State? Cambridge University Press: Cambridge. ——— (1996), The New Politics of the Welfare State, World Politics,Vol. 48, No. 1, pp. 143–179. ——— (2000a), Three Worlds of Welfare State Research, Comparative Political Studies, Vol. 33, No. 6–7, pp. 791–821. ——— (2000b), Path Dependence, Increasing Returns, and the Study of Politics, American Political Science Review, Vol. 94, No. 2, pp. 251–267. ——— (2001a), Post-Industrial Pressures on the Mature Welfare State, in P. Pierson (ed.), The New Politics of the Welfare State, Oxford University Press: Oxford. ——— (2001b), Coping with Permanent Austerity, in P. Pierson (ed.), The New Politics of the Welfare State, Oxford University Press: Oxford. 39

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3 Future welfare An uneven race to the top and/or a polarized world? Peter Abrahamson

Writing about the future is both an easy and an impossible task. Because nobody knows anything about the future – except that “in the long run we are all dead,” as John Maynard Keynes reminded us – we are free to speculate about it; but for the very same reason it is impossible: how can one write about something that we do not know anything about? Danish humorist Robert Storm-Petersen was famous for saying: “It is difficult to predict, particularly the future” (Det er svært at spå, især om fremtiden! ). So, what we are embarking upon here is guesswork, and the way we go about it is to investigate the past and the present, and then judge the possible future strength of general tendencies and various constituencies and other actors in the field of welfare entitlements and provisions, leading to suggestions as to whether existing trends are expected to be continued, or whether curves are expected to break and point in other directions. In retrospect, the social sciences have not been very good at predicting the future. Nobody had foreseen the fall of the Berlin Wall in 1989 and the subsequent crumbling of the state socialist system, or the Arab Spring in 2011. So, qualitative and radical political changes are difficult to foresee. In the field of economics it does not look much better. Nobody had predicted Black Thursday in the US in 1929, announcing the beginning of the Great Depression. The same goes for the first oilshock crisis in 1974 announcing the new period of globalization, and the Asian Financial Crisis of 1998, nor the recent (and at places, current) crisis – the Great Recession which began in the US in 2008 and quickly spread to most parts of the world. Demography is, probably, the discipline with the highest success rate when it comes to predicting future developments. Death and fertility rates do not change radically overnight, so demographers have a pretty good idea what populations look like years ahead, everything else being equal. But, and this is the important point, things seldom are equal. So, when there has been a downward trend in absolute fertility in tandem with modernization over the last 100 years, it has been a safe bet most places for many years. But the curve can be broken, and it has been broken for instance in Scandinavia, where fertility reached its (so far) lowest level in 1984 (1.4), but it has steadily albeit slowly moved back to close to 2.0 30 years later. Considering migration, demography resembles the rest of the social sciences, because this variable is so determined by unpredictable economic and political developments, rendering it equally difficult to predict. Anyway, there are very good reasons for trying to speculate about the future, and perhaps the best one is to warn about negative future scenarios forecasted to occur if everything is equal. 41

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Here the point is to create the necessary understanding of the imperative to change things exactly to avoid an undesirable future. Most forecasting regarding our environment is of that nature.When it comes to forecasting with respect to future welfare state developments, it is often normative in the sense that it is either pessimistic and negative or optimistic and positive, backing particular political and ideological positions. An obvious example is the publication of Future of the Welfare State by the OECD in 1980 reflecting on the backdrop of the first oil-shock crisis. Here the welfare state is viewed as a burden on the economy, and the welfare state is forecast as a leaner and more market-oriented system. This was a blueprint for a neoliberal approach to welfare issues with its emphasis on privatization, contracting out, stronger involvement of voluntary organizations and volunteers, deregulation and more choice. Citizens are either considered consumers in a welfare marketplace or clients to be controlled. This publication was the first “official” reflection on consequences of globalization, and it predicted a race to the bottom concerning welfare state development. With the clarity of hindsight 35 years later, it is clear to see that OECD got (most of) it wrong.The document reflected the dominating ideological perspective prevailing then, but that perspective has changed during the course of time, and welfare states have expanded both in breadth and width: more people are benefiting and benefits are better (for most risk categories). Our own attempt here reflects the situation after another crisis – the Great Recession – and it subscribes to the perspective that we are post-neoliberalism. The political and ideological climates have changed, economic growth has continued but gravitates towards Asia, but cultural institutions are resisting change in many places. Our perspective on the future is also normative, but it is the opposite of what OECD predicted in 1980. Now (in 2015) we foresee an expansion and consolidation of welfare states across the globe having more, not fewer, entitlements to install for citizens. We are optimistic on behalf of the welfare state and predict a positive development of it into the foreseeable future. However, we also expect an uneven development both when it comes to different spaces and territories and when it comes to different risk categories. The way we go about this exercise is to analyze major trends in welfare development since the OECD report was published. Hence, we are considering welfare states under globalization and we are discussing them within different geographical clusters: Europe and North America, Latin America, Asia-Pacific, North Africa and the Middle East, and sub-Saharan Africa. Quantitatively, we are mostly considering expenditure and coverage data and labor market participation; qualitatively we are sensitive to changing emphasis on particular risk categories or sectors. Adjacent to these descriptive data we rely on (parts of) the vast scholarly investigations into welfare state development. General world trends are shown in Tables 3.1 and 3.2. Table 3.1 Total public social expenditure (% of GDP 1990–2010 and estimates for 2045)

North Africa Sub-Saharan Africa Asia and Pacific Middle East Western Europe Eastern and Central Europe Latin America and Caribbean North America World Source: ILO (2014); * own estimates.

42

1990

1995

2000

2005

2010

2045*

4.2 2.4 3.4 4.9 20.9 12.8 8.0 14.0 5.8

4.3 2.5 2.8 5.2 23.6 15.5 9.6 15.8 6.0

5.9 3.2 3.5 6.6 23.3 14.6 10.2 14.7 6.5

6.4 3.8 3.0 7.6 24.8 16.6 11.4 16.1 6.7

9.0 4.2 5.3 8.7 26.7 17.6 13.2 19.4 8.6

18 8 10 17 27 20 15 20 –

Future welfare Table 3.2 Health and old-age coverage (latest year) (% of total population and population 65+)

Africa Middle East Latin America and Caribbean Asia and Pacific Central and Eastern Europe North America Western Europe

Health Care

Old Age

24.7 72.9 81.7 58.0 91.6 85.6 99.7

21.5 29.5 56.1 47.0 94.3 93.0 92.4

Source: ILO (2014).

The optimism concerning the future is very much a reflection of the past development where welfare expenditure increased everywhere since 1980. In both Eastern and Western Europe and in North America expenditures are high – 18–27 percent of GDP – and are not expected to increase much relatively, as share of GDP, but per capita they are expected to increase with economic growth which, as a conservative estimate, could be around 1 percent per year. Hence absolute expenditures could be 33 percent higher per capita in 30 years. For the least developed areas expenditures are expected to double in relative terms over the next three decades. Hence Africa could foresee an expenditure level around 8 percent, sub-Saharan Africa and the Middle East are expected to spend around 18 percent in 2045, and Latin America and the Caribbean may spend 15 percent. If economic growth continues at a level around 5 percent in the global south, the region will have significantly more resources to its disposal in 30 years; but the starting level is low. The various expenditure levels spill over into various levels of old age and health coverage, ranging from less than 25 percent in Africa to more than 90 percent in the OECD countries. In 30 years’ time the situation is expected to be about the same in the north, but in Latin America it is expected to have reached 75 percent and in Africa 50 percent The next section analyzes the development of European and other OECD welfare states during the period of globalization, that is from the mid-1970s. It is demonstrated how all states have expanded their social protection expenditure every year from 1980 to 2013, and it then discusses the development with reference to different clusters of welfare states: the UK, Scandinavia and Continental, Eastern and Southern Europe. They have remained distinct, but less pronounced, indicating a weak convergence, and a convergence at the top rather than at the bottom.The OECD countries have met the Great Recession of 2008 with liberal Keynesianism by combining tax cuts and spending increases with monetary easing.The literature that we subscribe to suggests that the old (European) social contract, with its emphasis on tripartite negotiations and full employment which was destroyed with globalization, is now being substituted by a new social contract labeled the social investment state, where a basic level of protection regarding health care, education and social security are guaranteed by the state under an assumption of active labor market policy. Finally, the EU 2020 strategy is recorded as an indication of regional political interests. The following section treats Latin America in a similar manner. It begins by recalling that the 1980s were considered the lost decade, and it underlined the understanding of Latin America as the most unequal region in the world. But during the 2000s many things have changed for the better.Welfare expenditure has doubled in absolute terms from 1995 to 2012, and the combined effect of rising market incomes and increased social protection has resulted in a reduction of 43

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poverty from 42 percent in 2000 to 25 percent in 2012. Then the development during the 21st century is discussed with reference to three different clusters of welfare states: familistic, state productivist and state protectionist. The latter ones and some states in the productivist group have reached a level comparable to Southern Europe, and all are upgrading social protection. Health care and education are approaching universal coverage, and so are pensions for formally employed people. But the high degree of informality within the labor markets in the region is a serious challenge to systems that base many entitlements on contributions from the social partners. The question of taxation becomes vital in Latin America because it has, up to now, been regressive, and it is expected to increase in the future due to tendencies of universalization of transfers and services. Hence taxes have, at least until now, contributed to inequality which must be considered one of the biggest challenges to Latin America in the future. A considerable number of regional organizations are at play in the region, and they all demonstrate solid commitments to social citizenship, eradication of poverty and equal treatment of all classes, genders and ethnic groups. However, it remains lip service and has no bearing on what is happening on the ground. The next section deals with the third region being considered here: the Asia-Pacific. Compared to the previous regions, this one is by far the most diverse both when it comes to economic development and cultural heritage. Even so, some common features are shared among most of the 35 states in the region: high economic growth and small social protection expenditure with relatively low levels of poverty and inequality. The recent development is discussed in some detail focusing on East Asia as the subregion that has attracted the most interest from the scholarly community. It has been subject to fundamental societal changes during the last three decades with strong welfare effects: for example the abandonment of lifelong employment and the severe reduction of three-generation households. The first one provided income and welfare services and the latter provided care, but with their withering away a serious care deficit has occurred across East Asia, a situation aggravated by huge waves of migration from rural to urban spaces. The subregion is again subdivided into three regimes: developmental welfarism, productivist welfarism and market-socialist welfarism. Common for them all is the world’s lowest fertility equilibrium, where women on average have between 0.8 to 1.4 children during their lifetime. This is strongly linked to the care deficit and women’s labor market careers, which again reflect the high level of education that women receive. Hence, the East Asian welfare regime is challenged regarding gender equality. Development, including welfare provisions and entitlements, has happened rapidly in East Asia, and all of the countries in the region have committed themselves to comprehensive – and in the case of the People’s Republic of China to universal – welfare coverage. Like the two previous sections, this one ends with a discussion of regional organizations of integration, and as was the case with the others they all signal a commitment to eradicate poverty and facilitate gender equality and a prosperous life for everyone in the region. And just like in the Latin American case, it has had no bearing on the lived life of people in the region. Then follows sections on North Africa and the Middle East and sub-Saharan Africa, the latter being the region in the world with the least developed systems of social protection. On paper, nearly all states have committed themselves to provide social security in the form of old-age protection, and many have set up health care, but only for formally employed workers. So, in reality coverage is very low. The last section sums up the general trends as they have been discussed throughout the chapter leading to the conclusion outlining some probable features of future welfare systems.

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Future welfare

Formulating utopias: international organizations and future welfare The section attempts a global stocktaking of human development in general and welfare state development in particular, by relying on recent reports from two UN organizations (International Labour Organization, or ILO, and the UN Development Programme, or UNDP) and the World Bank. To get an idea about dominating political ideologies associated with welfare state development, we analyze current policy documents from official international, mostly regional, organizations announcing their perspectives. We are well aware of the often huge discrepancy between what is said and what is being done, but the ideal or ideological formulations are nevertheless important information because they demonstrate the dominant normative perspective. Regarding welfare state developments, the ILO concluded in 2014 that only a minority of the world’s population (28%) is enjoying satisfactory social protection coverage, even when a huge majority and its politicians are supportive of a comprehensive coverage. This led the ILO to conclude that global social protection is an unfulfilled promise. Looking at various policies it concluded that the largest gaps exist with respect to unemployment protection and family policies, but other sectors, such as health care, show that a majority of the populations are covered, and an expectation of universal coverage is within reach. Major societal changes are summed up as climate change, migration, women (gender), youth and the world of work, which all call for welfare arrangements. The various official reports also assess to what extent progress has been made, and they unanimously conclude that indeed across the board there has been a positive development. This is being exemplified with reference to the so-called Millennium Development Goals which to a large degree have been met, with some important exceptions, namely that most African countries remain off track. UN’s own conclusion is that much has been accomplished saving and improving the lives of many people, but the agenda remains unfinished. The process has led to formulation of so-called post-2015 development goals that stipulate the total eradication of all forms of poverty and the need to address inequality.

Global stocktaking: the unfulfilled promise and the unfinished agenda Welfare systems are contested and different ideological positions advocate different institutional and financial structures and procedures. During times of crisis welfare systems find themselves in the paradoxical situation of being most in demand while being the least easily financed.Yet, overall, most political ideologies accept a space for welfare systems, and, generally, crises have facilitated increased public intervention into the well-being of citizens. This current situation is a result of a learning process where the crisis of the 1930s became the backdrop for a substantial creation and expansion of welfare systems in what later became the OECD-area (Europe and the Anglophone settler territories); and the 1997 Asian financial crisis had similar effects in that region. In between the first oil-shock in the mid-1970s facilitated a renewal of liberal criticism suggesting that the welfare state was part of the problem and not part of the solution. Latin America became, to some extent, a test bed for a neoliberal turn through the implementation of the so-called Washington Consensus, but it resulted in what has been identified as the lost decade of the 1980s. However, this neoliberal perspective has now been abandoned by most international organizations, regional trading blocks and nation states, and instead a modest state intervention into health, education and basic social security is now being advocated across the globe. This has been labeled the social investment state perspective, and it suggests that states have an interest in providing conditions for a healthy, well-educated and secure workforce in

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order to survive and strive in the enhanced global competition (Taylor-Gooby, 2008; Abrahamson, 2010; Jenson, 2010; Morel et al., 2012). It resembles the competition state perspective (Cerny, 1997) and a perspective considering the welfare state being productivist, which has been a widespread and accepted perspective in East Asia (see e.g. Holiday, 2000). Furthermore, practically all general, ideological and political communication concerning social rights as they are to be found in resolutions, recommendations and solemn declarations unanimously advocate a universal approach where all citizens are covered and where coverage is adequate. Global and regional organizations emphasize the importance of poverty orientation of investments as is clear from the current negotiations of the establishment of the Asian Investment bank, and this year is the year when poverty should have been reduced by half since the millennium. It seems that all regional organizations of cooperation share a commitment to develop and enhance social citizenship, and they all operate with a three-fold definition of sustainable development: it should be financially, environmentally and socially sustainable (Abrahamson, 2015). Hence from a rhetorical point of view social protection is widely recommended. Yet, on the ground it looks less promising, as the ILO summed up the global situation (2014): While the need for social protection is widely recognized, the fundamental human right to social security remains unfulfilled for the large majority of the world’s population. Only 27 percent of the global population enjoy access to comprehensive social security systems, whereas 73 percent are covered partially or not at all. (ILO, 2014: xxi) Nevertheless, the commitment is there: The ILO Social Protection Floors Recommendation, 2012 (No. 202), reflects a consensus on the extension of social security reached among governments and employers’ and workers’ organizations from 185 countries at all levels of development. Further, the roll-out of social protection floors is endorsed by the G20 and the United Nations. (ILO, 2014: xxi)

Europe and the OECD-area The 2008 financial crisis hit Europe pretty hard, and unemployment rose from 7 percent in 2008 to 11 percent in 2013; then it declined somewhat to 10 percent in 2014, and it is unevenly distributed where the hardest hit countries suffered the most. Hence in Greece and Spain overall unemployment is around 25 percent, while in Portugal and Ireland it is around 15 percent.Yet this unfavorable situation has not, until now, affected welfare expenditure negatively. On the contrary, all European states (but two) have increased their social spending since 2008 measured as share of GDP; on average for EU-28 it increased from 26.7 percent in 2008 to 29.5 percent in 2012; and when social spending is measured per capita in PPP it has increased everywhere in Europe (Eurostat, 2015). This is continuation of an unbroken trend that started more than 100 years ago: year by year European states have spent more, not less, on welfare issues. This has generally been recognized in the literature when it comes to the Great Depression of the 1930s and the golden age of welfare state development, but has been challenged regarding the period of globalization from the mid-1970s onwards.

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European welfare states and globalization Hence the literature is divided between an austerity and retrenchment position on the one side, arguing that globalization and crisis compel welfare states to cut back state intervention in general and social entitlements in particular guided by a neoliberal ideology. The other side argues that development and democracy, to put it short, result in an upward pressure on social protection, and even if “the jury is still out over the future impact of EMU, a scenario of across-the-board retrenchment seems most unlikely in the foreseeable future” (Bolukbasi, 2009: 528). This tension between, normatively speaking, a positive or optimistic versus a negative or pessimistic view on the present and future of welfare entitlements and provisions has been carried over into the current assessment of welfare development. At first sight it may seem surprising that social scientists can reach such fundamentally opposite conclusions, but the confusion is largely based on imprecise definitions of time, space and context. One of the important lessons learnt from welfare state development hitherto is that “there is no such thing as the welfare state” (Arts, 2013: 20). Welfare states come in plural even when they cluster around four or five regime types; thus being accurate about which spatial entity is being analyzed is vital. Equally important is being precise about what time frame is being investigated (short- or long-term, crisis or prosperity, 1980s or 2000s, etc.). Furthermore, different sectors may develop differently, thus it is paramount to specify which policies and policy instruments are viewed. Finally, there are often great differences between what is being said and what is being done, so being precise about whether policy documents and other input variables are analyzed, or whether outcome variables are being considered, can point in different directions. Analyzing European welfare states during globalization until the current Great Recession (i.e. from the mid-1970s to the late 2000s), we found that neoliberal rhetoric dominated the political discourse especially during the 1980s and 1990s, the period by some labeled a time of uncertainty and challenge (Taylor-Gooby, 2008), but faded during the 2000s to give way for a new welfare state settlement around productivist welfare arrangements labeled the social investment state. Hence, overall, the way welfare was talked about varied greatly during the 1980s and 1990s where it was seen as a burden on the economy, and during the 2000s where welfare is seen as a necessity for the economy. Most recent data on European citizens’ attitudes towards welfare policies and support for the poor strengthen this picture, because “social policy seems to be on solid ground, and citizens’ satisfaction does not erode the welfare-state’s attitudinal base” (Toikko and Rantanen, 2015: 38).

Europe in the Great Recession Considering the most recent development, all European welfare regimes met the 2008 financial crisis – the Great Recession – with traditional Keynesian means leading to an expansion of welfare expenditure as already mentioned. Taking the whole of the OECD-area into consideration the trend is the same: before the crisis (2005) total public social expenditure in OECD stood at 19 percent of GDP, but since 2009 it has increased to 22 percent (OECD, 2015). Every year during the crisis absolute expenditure measured as per capita expenditure in US$ PPP has increased; in 2005 the average for OECD was 6.022 and it increased to 6.856 in 2011 (OECD, 2015). There are, however some indications pointing to a shift towards a less expansive policy in order to accommodate strict fiscal discipline from 2011 and onward especially in the hardest hit countries like Greece and Spain.

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Equally important we should recall that “whatever caused the public debt crisis in the South, it was not welfare profligacy,” as Göran Therborn reminded us (Therborn, 2013: 472). Or, as expressed by another observer: “After all, it is not the European social model in its different national incarnations that has brought Europe close to bankruptcy” (Tsoukalis, 2012: 48). Yet, “political discourse calling for the reduction of public spending, and the implementation of strict austerity measures in Southern Europe, openly recommended the reduction of social rights and welfare entitlements” (Marí-Close and Moreno-Fuentes, 2013: 486). What is characteristic of the South European welfare state is its bias towards protection the elder population (“the strong age-bias orientation of social policies,” Marí-Close and Moreno-Fuentes, 2013: 479), because they have all “significantly reduced poverty among the retired” but “minimum income systems was not able effectively to confront poverty risk before the crisis, and much less, during it” (Gutiérrez, 2014: 389–390). Neither have they managed to establish social care services which would enable women both to have children and pursue a labor market career, and they are therefore still trapped in a low fertility equilibrium, because women choose careers over motherhood. Another subregion anticipated to have gone or stayed neoliberal was Eastern and Central Europe, yet that has not happened; instead a diverse development has occurred where the Baltic states and Romania and Bulgaria are characterized by high inequality, low social expenditure and modest degrees of social inclusion, while the Visegrad countries score quite high on these indicators (Adascalitei, 2012: 62). But, in general the whole region performed quite well in comparison to other regions at the same level of economic development (Haggard and Kaufman, 2008), and they have preserved a strong element of social citizenship rights over from the socialist legacy (Inglot, 2008). So, despite the diversity there is some consensus in the literature that post-socialist countries have, by and large, exhibited a range of commonalities in the way in which social policy transformations took place, amounting – overall – to the residualization of underfinanced and institutionally fragmented, but universalist welfare states. (Polese et al., 2014: 186) Turning to the liberal welfare regimes in the OECD-area the development in the UK since the 2010 election which brought to power a coalition government where the Conservative party had the upper hand could have been a showcase for neoliberal retrenchment if political statements were taken for granted. Perhaps the most confusing thing about assessing welfare development in current societies is the marked difference between rhetoric, which stipulates privatization, contracting out, retrenchment and cutbacks, and actual policy development indicating continuation and consolidation more than radical changes and reductions. Analyzing the attempt of the Coalition government 2010–2015 to roll back the state, both John Hills (2011) and Peter Taylor-Gooby (2012: 78) found that it is unlikely that the coalition will succeed. So, rather than change, continuation can be observed, as when Hills (2011: 606) wrote: “Looking back over the last thirty years, the scale of welfare activity in the UK has greatly increased, but shape of its architecture has changed relatively little.” In a detailed analysis of how the Scandinavian countries reacted to the current crisis, we showed that all of the countries used it as a pretext for shaping up the welfare state, momentarily expand coverage and period of receiving help, particularly regarding families and the elder population. The crisis has meant a consolidation and expansion of welfare entitlements and provision with the important exception of unemployment and social assistance benefits (Abrahamson, 2012, 2015). 48

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Generally, European reactions to the crisis can be characterized as liberal Keynesianism as opposed to (traditional) social Keynesianism. By the former is meant “combining tax cuts and some spending increases with monetary easing, while resisting protectionist measures” (Pontusson and Raess, 2012: 14). This is in contrast to “the early phase of the crisis [which] proved to be a Keynesian moment” (Ladi and Tsarouhas, 2014: 173). There is a widespread agreement in the literature that initially the European welfare states indeed mitigated the worst effects of the economic downturn that started in 2008 . . . However, the situation changed in the second phase of the crisis, when a number of European governments turned from deficit-spending to austerity . . . The cuts were particularly severe in those countries that were hit hardest by the crisis . . . Measures included the reduction in unemployment pay and social assistance as well as cuts in care, sickness, and housing benefits. (Hermann, 2015: 83) A study particularly on minimum income provisions by Marchal, Marx and Mechelen (2014) confirms this picture with two important nuances. During the first phase of crisis management some governments tried to boost the income package of those relying on social assistance, but this was mainly achieved through “hikes in child-related benefits.” Furthermore, in some countries “activation efforts aimed at minimum income recipients were intensified” (Marchal et al., 2014: 263). Another comparative study showed a “contractarian understanding of fairness, particularly in restricting eligibility to unemployment benefits and increasing sanctions to sharpen focus on the responsibilities of social citizenship” (Windebank and Whitworth, 2014: 100).

Towards the social investment state A convincing part of the literature sums up the development in the OECD-area as the development of the social investment state. According to Keersbergen and Hemerijck (2012: 478) “the novelty of the new approach lies in the combination of investment in human capital and stronger work incentives.”This is also true for the otherwise liberal welfare state of the US. It has performed an expansionary policy in the welfare area including establishing something bordering on a public, “universal” health care system. Measured conventionally as public expenditure as share of GDP the US still trails the OECD-average by 3 percentage points (19 vs. 22); but measured as net public expenditure the US is among the highest spenders in the world, with 29 percent of GDP devoted to social protection, compared to the OECD average of 22 percent (OECD, 2015). One negative consequence of the crisis has been an increase in populist, nationalist and xenophobic movements across Europe (Nicolaïdis, 2012; Tsoukalis, 2012; Polyakova and Fligstein, 2013). This is a very serious and troublesome development in many respects, but from the perspective of the welfare state this development is not posing a threat, because the xenophobic political right in Europe is positioning itself to the left on the social scale and is supportive of welfare policies. Survey data indicate that Europeans are highly supportive of their welfare states as summed up by Patrick Diamond and Guy Lodge (2014: 46): “The welfare state remains broadly popular, widely supported among a range of constituencies and classes . . . there is little appetite to move away from universal ‘solidaristic’ welfare systems to ‘liberal’ regimes largely targeted at the poor.” The major problem identified is a weaker support for covering so-called new social risks compared to traditional ones.“As such the threat to social justice in Europe is not radical institutional 49

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change, but the ‘frozen’ welfare state landscape where resistance to change is institutionalized, and major interest groups are able to define how welfare systems operate” (Diamond and Lodge, 2014: 57). Unsurprisingly in the wake of the global recession, key principles of the welfare state such as protecting individuals from unforeseen risks and ensuring income security in old age appear to command widespread public support. Those who predicted “the end of welfare” given the realities of a post-industrial, globalized economy and a crisis in the public finances have largely been proved wrong. The welfare state in Europe remains broadly popular and widely supported among a range of constituencies and classes (Diamond and Lodge, 2013: 10).

Latin America The 1980s, which announced the beginning of the most recent period of globalization, was across Latin America labeled the “lost decade,” and it lasted well into the 1990s. It was a setback for the mostly immature welfare states in the region and it underlined Latin America as the most unequal region in the world. During the 21st century, however, things have changed decisively with significant improvements in social citizenship. As many observers have noticed: “Between 1998 and 2011, leftist presidents were elected in 11 different Latin American countries, placing two-thirds of the regional population under the authority of national governments of the Left” (Roberts, 2012: 1). Kenneth Roberts also observed that many of the governments have remained relatively cautious and orthodox in their management of macroeconomic policies, but they all have introduced or expanded redistributive social policies. Hence social expenditure more than doubled in most Latin American countries from 1995 to 2012 in absolute terms, and relatively it increased from 15 percent of GDP in 1995 to 19 percent in 2013 (ECLAC, 2014). The combined effect of rising incomes and increased social protection have resulted in a reduction of poverty in the region from 42 percent in 2000 to 25 percent in 2012, calculated as those living on less than US$4 a day (UNDP, 2014: 2). A similar trend is found when the Economic Commission for Latin America and the Caribbean calculated the national poverty rates for the region: in 1980, 42 percent of the region’s residents were poor; this increased to 48 percent at the end of the lost decade, but it gradually fell to 28 percent by 2013 (ECLAC, 2015). Like other regions the averages mask considerable dispersion among the states, and the literature identifies three different versions of the Latin American welfare regime similar to Esping-Andersen’s Three Worlds of Welfare Capitalism (1990). Juliana Franzoni Martinez (2007) distinguishes between state protectionist (Brazil, Costa Rica, Cuba, Mexico, Panama, Uruguay, Venezuela), state productivist (Argentina, Chile) and familistic (Bolivia, El Salvador, Honduras, Guatemala, Nicaragua) welfare states. Scholars affiliated with ECLAC have calculated what they consider welfare gaps, as listed in Table 3.3. Severe welfare gaps are concentrated among the familistic welfare states in the region, even when some of the countries, noticeably Bolivia, have made enormous progress by reducing poverty from nearly two-thirds of the population in 1997 (62%) to a little more than one-third (36%) in 2013 (ECLAC, 2015). Table 3.3 Latin American states according to degree of welfare gap (2012) Severe Gaps

Moderate Gaps

Small Gaps

Bolivia, El Salvador, Honduras, Guatemala, Nicaragua, Paraguay

Colombia, Ecuador, Mexico, Peru, Dominican Republic

Argentina, Brazil, Costa Rica, Chile, Panama, Uruguay, Venezuela

Source: Cecchini, Filgueira and Robles (2014: 21–23).

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As of today all states in the region declare themselves welfare states, but for some of them, this is a relatively new label. Countries such as Bolivia, Ecuador, El Salvador, Honduras and Guatemala have been labeled exclusionary welfare states, where a small privileged part of the population had access to social protection, and Fernando Filgueira (2007: 156) holds that “most of these countries do not in reality have a social state or a state for that matter until the 1970s, but rather a coercive apparatus servicing the privileged.” This is different today, where these states in the familist cluster spend between 8 and 12 percent of GDP on social protection. Like everywhere else, trends are not uniform for different sectors of policies and risks, but the general trend does point to wider coverage both of risk groups and of people.

State protectionist welfarism Considering the state protectionist cluster most countries have obtained universal coverage regarding health care, and it is anticipated that the whole region will allow universal health care access for all citizens soon (Atun, 2014: 14). Basic education has universal coverage in the whole region, but like health care, out-of-pocket expenses apply. The state protectionist group also expands higher education (Pribble, 2014). Regarding pensions, nearly 90 percent of the populations were covered in Brazil and Uruguay already in 2009; about 60 percent were covered in Costa Rica, and in Mexico and Panama about 50 percent were covered (ECLAC, 2011). While there is still a way to go to obtain full universal coverage, it is very much due to the fact that even within this cluster of the most advanced Latin American states, a considerable share of the population is still working in the informal sector. In 2011 that was the case for 25 percent of the population in Uruguay (Grassi, 2014: 124). Going beyond the three pillars of the social investment state (education, health care, basic social security, i.e. pensions) public care policies are under-developed and they operate in a “weak institutional framework.” Costa Rica and Uruguay are highlighted for their (new) focus on care for dependent people, but overall, commitments are more programmatic than real (ECLAC, 2012: 218–219). Estimating outcomes this cluster of countries has experienced a decrease in inequality from 1990, when it ranged in terms of the Gini index of income distribution from 0.63 to 0.44, to 2013 where the range was 0.55–0.38, and poverty rates in Costa Rica and Uruguay are comparable with European values (18% and 6%). On the average, poverty within this cluster was 35 percent in 1990, and it has dropped to 22 percent in 2013 (ECLAC, 2015).

State productivist welfarism Turning to the state productivist cluster of the Latin American welfare regime, we find that in Argentina, Chile, Colombia and Peru there is now a high coverage of access to health care, but it is segmented along occupation and there is a considerable co-payment (Atun, 2014: 14). Regarding pensions at least 85 percent of Chileans and Argentineans are included, compared to about 30 percent in Colombia, Ecuador and Peru (ECLAC, 2011).The most impressive progress is found in the area of poverty reduction, where the establishment of the so-called conditional cash transfer schemes is a dominant Latin American feature. Social assistance is given under conditions usually tied to health or education: Help can be conditioned on children attending school, or pregnant women having regular checkups. Such programs reach 25 percent of the population in Colombia, 44 percent in Ecuador and 22 percent in the Dominican Republic (Cecchini and Martinez, 2011; see Aspalter, 2016). Measured in relative terms, social protection expenditure has increased significantly during the most recent period among this group of countries. For instance Ecuador doubled its 51

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performance from 4 to 8 percent of GDP devoted to social welfare, and the richer countries such as Argentina and Chile now spend 28 and 15 percent of their GDP on social protection, respectively.Viewed in absolute terms, as expenditure per capita, all the countries in this cluster have doubled or tripled their social expenditure from 1991 to 2012. For instance, expenditure increased from US$728 to US$1,614 at fixed prices, and in the Dominican Republic the development was even more pronounced, but starting from a much lower-level expenditure rose from US$66 to US$243. There are, thus, huge differences among the countries but the trend is uniform: a much stronger emphasis on social protection in general, and especially on conditional cash transfer systems. Consequently, poverty rates have been reduced drastically, and the levels in for instance Argentina and Chile are now comparable to those of Europe, with 5 and 8 percent of the populations respectively living in poverty and very few living in extreme poverty. Regarding the other countries poverty ranges from 25 to 40 percent in 2013, but in 1990 the range was 50–60 percent, so the share of the poor population has nearly been halved, which is quite impressive. However, the reduction in poverty has not spilled over to decreases in inequality since the Gini (of income distribution) varied from 0.44 to 0.54 in 2013, and in 1990 it was 0.46–0.55 (ECLAC, 2015).

Familistic welfarism Regarding the familistic welfare regime, universalization of health care has some way to go. For instance in Bolivia there is still a very segmented and uncoordinated system, which has resulted in one of the lowest coverage rates in the region. So, at least until the mid-2000s most of the indigenous and rural population was not covered, because this is linked to formal employment, and these people mostly work informally (Mesa-Lago, 2007: 198). Guatemala, Haiti, Honduras and Paraguay all have a public pension system, but parallel to health care it is linked to formal labor market performance. Therefore, coverage has been low in these countries as it has been for Bolivia, El Salvador and Nicaragua (under 20%), but in 2007 Bolivia introduced the socalled Renta Dignidad (dignified pension), which is a non-contributory universal entitlement to everybody 60 years and older (Riggirozzi, 2010: 74), and at time of writing (Spring 2015) in La Paz enormous billboards announce that La Rentaes un Derecho (“Pension is a right”). There has also been an increase in health care services as a result of the proliferation of conditional cash transfers which, in the case of Bolivia in 2010, included 18 percent of the population. In Guatemala, one of the countries that historically has prioritized social protection the least, the conditional cash transfer systems (CCTs) have been expanded to include 23 percent of the population, and in the other countries within this group they reach about 10 percent (Cecchini and Martinez, 2010). Not surprisingly, this group of countries spends the smallest share of their modest GDP on social protection in 2013, ranging from 8 to 18 percent. These are moderate rates, but they are a huge increase compared to 1990, when Jamaica topped the list with 8 percent and when El Salvador spent 3 percent ECLAC, 2015). Partly as a result hereof inequality has dropped more than 10 percent (Gini index for income distribution: from 0.53 to 0.47) from 2000 to 2013 in Bolivia, El Salvador, Honduras and Nicaragua. Guatemala remains the most unequal state in all of Latin America with a Gini of more than 60 percent, which by the UN is considered such a high level that it threatens social cohesion. Poverty has decreased within this group of countries at it has across the whole region, and the most impressive development is that of Bolivia where nearly two-thirds of the population (64%) was poor in 2005, while this only applied to about one-third (36%) in 2013. More modestly 52

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poverty decreased from 80 percent in 2000 to 69 percent in 2013 in Honduras, the highest in the region. Hence, there is a long way to go for Central America, with the important exception of Costa Rica, because 41–69 percent of the population still lives in poverty, even when extreme poverty has been reduced substantially (ECLAC, 2015). What can be observed for the whole region is a significant decline in inequality, and, “overall, the important contribution of social policy to the reduction in inequality through the expansion of education and public transfers is evident” (Lustig et al., 2013: 138). Scholars from Tulane University’s Commitment to Equity Project confirmed the situation described and analyzed by the scholars from the Economic Commission for Latin America and the Caribbean, when they demonstrated that there is significant variation rather than a common Latin American welfare state. But they also found some common elements. The most progressive major tax instrument in modern fiscal systems, personal income taxes, represents a small share of total tax revenues (2.1 percent of GDP on average versus 9 percent on average for the OECD. Including all taxes and transfers, the first group of countries (Argentina, Brazil, and Uruguay) achieves a reduction of inequality between 20 and 25 percent, while a second group (Peru, Bolivia, and Mexico) reduces inequality by 7.6–16 percent. However, when we add the effect of net indirect taxes, the poverty headcount in Bolivia and Brazil is higher than it was for market income. In these two countries, consumption taxes more than wipe out the poverty reduction achieved through direct transfers. (Lustig et al., 2014: 292; see also Lustig, 2013;Tanzi, 2013)

Asia-Pacific This region is the most diverse with respect to culture, geography, economic development and social protection. It comprises 35 states spreading across all economic categories: lowincome, lower-middle-income, upper-middle-income and high-income states; covering the subregions of Pacific, South Asia, South East Asia, East Asia, and Central and West Asia. Each subregion shows internal differences, but more prosperous states usually also spend more on social protection, even if the relationship is far from one to one. On the contrary, particularly East Asia has demonstrated impressive economic growth for decades, while social protection expenditures have expanded at a much slower pace. Regarding the whole region OECD summed up the dispersion thus: “Public social spending in Japan, New Zealand and Australia is around 20 percent of GDP, and around 10 percent of GDP or more in Korea, the Kyrgyz Republic, Mongolia and Timor-Leste. By contrast, public spending on social protection is around 2 percent of GDP in Cambodia, Indonesia, Lao PDR and Pakistan” (OECD, 2014: 104). In comparison to Latin America, for instance, the Asia Pacific stands out as a small spender with an average of social protection expenditure reaching about 5 percent of GDP, while it was 13 percent in Latin America, which has had much smaller economic growth rates.

Social protection index Investigating development of social protection in the region, the Asian Development Bank (ADB) constructed a so-called social protection index (SPI) for all 35 states. “The SPI is a relatively simple indicator that divides total expenditures on social protection by the total number 53

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of intended beneficiaries of all social protection programs. For assessment purposes, this ratio of expenditures to beneficiaries is compared with poverty-line expenditures” (ADB, 2013: xii): There is a wide range of results for the SPI across Asia and the Pacific as a whole. The SPI varies between 0.416 for Japan and 0.005 for Papua New Guinea. Thus, Japan’s social protection spending represents about 42 percent of poverty-line expenditures, while Papua New Guinea’s represents a mere 0.5 percent. These percentages are equivalent to 10.5 and 0.125 percent of GDP per capita. Only four countries have SPIs of 0.200 (or higher), representing 20 percent (or more) of poverty-line expenditures, or 5 percent of GDP per capita. Two of the four, Japan and the Republic of Korea, are high-income countries; the other two, Mongolia and Uzbekistan, are post-Soviet transition economies. (ADB, 2013: xv) Data are from 2009 and focus on three major areas of social protection: social insurance (pensions and health care), social assistance and active labor market policies, and it is demonstrated that social insurance is the predominant form of social protection in Asia and the Pacific. Furthermore, it is also the measures with the largest depth meaning having the most generous benefits. Social assistance has a much smaller depth but a wider width, meaning it reaches many more beneficiaries. Finally, active labor market policies are the least developed sector in Asia Pacific. In East Asia, over 83 percent of all potential beneficiaries of social protection receive some benefits. In South Asia and the Pacific Islands, the breadth of coverage of social protection is relatively low. For example, in South Asia only about 20 percent of potential beneficiaries of social protection receive benefits, and in the Pacific Islands, only about 12 percent. Across Asia and the Pacific generally, the higher a country’s GDP per capita the broader its coverage of social protection. (ADB, 2013: xviii) Not surprisingly, the non-poor benefit disproportionately from social insurance, while the poor benefit mostly from social assistance. Importantly, the report identifies what it labels the “missing middle” of social protection systems: they are neither in a position to benefit from social insurance (because they are not employed in the public sector or large private sector firms) nor in a position to benefit from social assistance (because they are not regarded as poor). Viewed in a gender perspective it is clearly so that women benefit decidedly less from social insurance than from social assistance. Overall, the report concluded that there is room for improvements in the region: These general results suggest that many countries in Asia and the Pacific have not yet developed very extensive or advanced systems of social protection. In particular, the many countries graduating to middle-income status in the last decade or so have not correspondingly developed their social protection systems, and the record of uppermiddle-income countries does not appear to be much different from that of lower-middleincome countries. Most post-Soviet transition economies seem to perform better than other countries but this might be attributable primarily to their pre-1990s historical context. (ADB, 2013: 24) 54

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Focusing on East Asia: latecomers and small spenders From a scholarly perspective the subregion that has attracted most attention is East Asia, which, particularly by Western scholars or observers from the global north, has been considered comprising a distinct welfare regime. Early on it was referred to as a Confucian model, emphasizing familialism and filial piety under normal circumstances, but where the Prince resumes responsibility in cases of orphans, widows, persons with a handicap, the ill and the childless. More recently this perspective has been criticized for being overtly generalizing and culturalizing, and instead different labels such as oriental, Pacific, Pacific American, productivist, developmental, informal or hybrid have been applied. Geographical focus has also changed over time. To begin with analyses concentrated on Japan, later the “four tiger economies with a dragon head” (Castells, 1992) – South Korea, Hong Kong, Taiwan and Singapore – became the academic focal point; and more recently, analyses of Mainland China and some of the South East Asian states like the Philippines, Malaysia and Thailand have appeared. Many have referred to the apparent paradox of East Asia being at the same time characterized by low levels of social expenditure and high life expectancy and relatively few poor. In order to reduce complexity, the remainder of the discussion here will narrow in on East Asia as the most advanced subregion. One thing that East Asia demonstrates is that a comprehensive commitment to social citizenship does “not” follow automatically from development and modernization. This subregion has seen the most rapid economic growth ever obtained, simultaneously with a very modest social protection system. This has led some scholars to define the East Asian welfare model as productivist; seeing it as an adjunct to the economy or subsumed by it. That is, the purpose of welfare policies was to underpin a particular economic system, rather than response to peoples’ social needs and risks (Holiday, 2000). Somewhat parallel to this view, others have suggested to label the welfare regime developmental (Kwon, 2005), again suggesting that social policies are subordinated to an economic development imperative. Others have indicated that focusing on low social protection expenditure is a backward looking perspective (Haggard, 2005) which can be illustrated with reference to Japan, for instance, which spent 24 percent of GDP on welfare policies in 2012, similar to European states, and South Korea and Taiwan spent about 10 percent, which is the same as Chile and Mexico, for instance. Having said that, it is remarkable that the two city states, Hong Kong and Singapore, with a GDP per capita of US$53,000 and US$79,000 respectively, only spent respectively 5 percent and 3 percent on social protection. As already mentioned, less developed countries in the region like China, Malaysia and Thailand also spent one-digit figures on social protection in 2012 (3–7%); but it is worth recording that when comparing 2012 to 1990, social protection expenditure expanded relative to GDP five times in Thailand, three times in South Korea and double that of Japan and Singapore, at the same time as the countries had at their disposal an ever-increasing GDP year by year. Hence the relative growth masks a substantially higher growth in absolute terms as social expenditure per capita. As first pointed out by Stein Kuhnle and Sven Hort (2000), what characterizes East Asia is that the states in this region developed their welfare systems late in chronological time, but early in developmental time.This was confirmed by the OECD-study reminding us that presently East Asia is where Europe was in the 1960s, and it took Europe about 100 years to get to that level, while in East Asia it only took about 50 years (OECD, 2014).

Rapid societal changes Earlier assessments of social protection in East Asia have pointed to elements that we recognize from Latin America like the high degree of informal work, particularly regarding women and 55

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the unskilled, and the absence of collective care services concerning persons with a handicap, children and the elder population. In both regions welfare systems focus on education, pensions and health care. This has led to the characterization of both welfare regimes as informal care regimes (Abrahamson, 2011) or informal security (Barrientos, 2004); this is indeed an issue, but it is now on the political agenda, and the most advanced states have already introduced child and elder care. For instance, Japan introduced the so-called Gold and Angel plans for children and the elder population during the 1990s as a reaction to the “graying” of society, and in its own understanding Japan has considered itself a welfare state since 1973 (MHW, 1999). South Korea and Taiwan have followed suit during the 2000s and in all three countries these new policies were a reaction to fundamental changes in society. First the lifetime employment scenario, where male workers were associated with the same company the whole working life and where they and their families enjoyed a number of welfare benefits including vacation homes and housing in exchange for a high degree of loyalty. In Japan the phenomenon was called kigyochusinchugi, which literally means “corporate centrism,” and according to Ito Peng (2000: 88) this was equivalent to the social contract in Europe in the post-World War II period. A similar role was taken in Korea by the so-called Chaebols – big capitalist conglomerates, often controlled by one family. This situation of lifelong employment is, however, in the process of being phased out, together with another traditional institution, namely the three-generation family household. In this the different generations could reciprocate help and care, but that is no longer possible when they are separated by long distances because of migration to the cities. Hence, since the 2000s only a minority of the populations in the region live in three-generation households. This has put age-old traditions of care under tremendous pressure because it is no longer possible for grandparents to care for their grandchildren or for adult children to care for their frail elder population. This situation is being challenged by declining fertility which either results from a deliberate one-child policy, as is the case in China, or from women pursuing careers on the basis of high educational achievements, but finding it close to impossible to be responsible for children at the same time, because they receive no collective help. This has resulted in the lowest absolute fertility rates in the world; depending on the source it ranges between 0.8 and 1.4 children per women in most of the countries in the region (ADB, 2014). In China these demographical changes are schematized as the 4–2–1 family structure, indicating that the one child can foresee having responsibility for two parents and four grandparents. This has already proven an enormous challenge, and governments have started introducing, albeit inadequate, public care.

Developmental welfarism Huck-Ju Kwon (1998) has suggested the East Asian welfare regime which he labeled developmental is divided into a selective and an inclusive variant. Common for them is that the role of the state predominantly is that of regulator rather than facilitator, and there has been an absence of trade union and social democratic influence. The inclusive regime refers to Japan, Korea and Taiwan, which are the countries that were the first ones to introduce basic security regarding pensions, health care and education. Hence, pension coverage in Japan in 2012 was 95 and 80 percent in Korea (ADB, 2014; OECD, 2014). As already mentioned, Japan has introduced some child and elder care and the other countries are developing similar services. They are, however, seriously inadequate, and those who can afford it are importing domestic help from the surrounding poorer countries to solve the problem on a private basis.

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Reconciling work and family life – the work-life balance – has become a serious challenge because there still exists a strong expectation that grown-up children will take care of their old folks.Women throughout the region have reacted by having one child relatively late in life, or by not having children at all and instead pursue a labor market career. In Korea this has resulted in a situation where every tenth marriage is with a foreigner (Statistics Korea, 2015), because highly educated and emancipated Korean women refuse traditional Korean men, who then import mail order brides from South East Asia and Mainland China, who are seemingly more willing to accept a traditional division of labor within the family. This group of countries is the most advanced in the world when it comes to technology and civilization with one important exception: equality of the sexes. Generally, women are better educated than men, but they are subject to significant discrimination in the labor market and they are nearly absent in the political arena, and they are expected to live up to the Confucian dictum regarding caring and honoring for family members. Otherwise, income inequality is moderate with an income distribution Gini of 0.31 in Korea, which is equivalent to Germany, and in Japan and Taiwan it is 0.34, similar to Southern Europe. The poverty rate of about 15 percent is also similar to Southern Europe, and the UNDP Human Development Index places these countries on the top together with the Scandinavian countries. A major reason for this is the longest life expectancies in the world, and here women are more privileged than men: 83 years for women and 80 for men in 2012 (ADB, 2014; OECD, 2014). The selective developmental welfare regime refers to the two city states of Hong Kong and Singapore. Here social security revolves around the so-called Provident Fund (PF), which the British established in Singapore in 1955, and it was continued after independence in 1959. It is a mandatory social insurance system for all citizens in the labor market, and it covers four areas: pension, housing, health and invalidity. It is based on individual accounts with a limited public subsidy and limited redistributional effects. To begin with, contributions were moderate, but over time they have expanded to about 30 percent of wages and salaries. It covers family members too, and the housing element is central, because it enables citizens to borrow and become home owners, which has happened to a large degree. Hong Kong remained a British Crown colony until 1997 and had established various pension funds for different groups of public employees such as school teachers and administrators. In 1997 it was decided to establish the mandatory Provident Fund which started operating from 2000 and which should cover everybody. Common for both Hong Kong and Singapore is a very liberal, market-oriented welfare policy. Measured against GDP social protection expenditure is very low, respectively 5 and 3 percent. Yet, pension coverage is respectively 79 and 84 percent, but inequality is high, similar to Latin America with an income Gini of 0.54 in Hong Kong and 0.48 in Singapore. Poverty is also quite high, and recently (2013) it reached 28 percent in Singapore. Considering the future for Asia the development in China is, of course, of utmost importance, simply because of its size. China is special with respect to having developed a dual system of social protection separating urban and rural communities by allocating different systems for each area. This system has made the hukou, the household registration system, completely determining, because it implies that one is only eligible for help where one is registered. In a situation with an internal migration of 250 million people each year, this creates enormous problems. Migrants are working and de facto living in big cities in the eastern and southern parts of the country, but they officially live in rural areas, and thus are not eligible for services where they are. Combined with the unintended consequences of the one-child-policy – the care deficit – strong pressure has been mounted, and the Chinese Communist Party has taken steps to develop and expand care services particularly for the elder population, although they are grossly inadequate.

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With an eye to the future, it is interesting that with the five-year plan of 2009–2014 it was announced that China has decided to develop a universal social protection system (CDRF, 2012). In 2012 China spent 7 percent of its GDP on social protection, and in absolute terms expenditure has increased substantially every year. Only about one-third of Chinese are covered with pensions so far, but education and health care are universal, even when out-of-pocket payments apply. China has taken a gigantic step forward by eradicating extreme poverty, and with less than 19 percent poor, China is similar to the other states in the region. On the other hand, inequality has expanded in step with economic growth and now stands at Gini 0.42 (for income distribution) and this has been a strong motivating factor for expanding social protection since 2012 (ADB, 2014; OECD, 2014). Summing up, Gao, Yang and Li concluded that “the Chinese welfare state is likely to become more integrated, generous, and progressive in the future” (2013: 743).

Middle East and North Africa (MENA) Like in the other regions scholarship has sought to define an overarching concept for social welfare organization in the MENA region.The welfare regime that developed during the 1950s and 1970s has been labeled “authoritarian corporatist,” thereby indicating that its key objective was “nation building and consolidation” rather than responding to democratic and grassroots demands. Nevertheless, most states were able to provide free schooling, health care, subsidized grain and public utilities and pension plans for state employees. But it was limited in scope. “The main beneficiaries were the largely male employees of the public sector and their families” (Karshenas et al., 2014: 727; see also Prasad, 2014). However, special to this region, subsidies on food and fuel were very important elements. For instance, in Egypt in 2007 subsidies took up 8.5 percent of GDP compared with 2.3 percent public expenditure on health, and in Syria fuel subsidies amounted to 10.3 percent of GDP while public spending on health was 2.1 percent, on par with food subsidies (El-Laithy, 2011, cited in Karshenas et al., 2014). Even more than elsewhere benefits go disproportionately to the middle classes (Loewe, 2013). States in the region are not small spenders, but because of the occupational bias large groups such as agricultural workers, household and family domestic workers, and migrants are excluded from coverage (  Jawad, 2015). A third element particular to this region (and large parts of sub-Saharan Africa) is the high level of conflict and militarism. Erkan Gunes and Mehmet Aysan (2014: 83) demonstrated that militarism is associated with poor welfare distribution and more generally with poor political economic outcomes. Fourth, religious non-governmental organizations (NGOs) have played and continue to play an important role in the region. For instance, in Jordan the Muslim Brotherhood has become more active than the state since 1989 in providing social welfare (Harrigan, 2009). Also like in other regions, the regime has been differentiated to accommodate the high degree of dispersion within it. Hence, many sources rely on Blandine Destremau (2005), who suggested that four distinctly different models were at place: contributory with a wide range (Algeria, Tunisia, Egypt), contributory with limited coverage (Lebanon, Morocco, Jordan, Yemen, Syria, Sudan), category-based or paternalistic state system (Gulf countries) and generalized system of insecurity (Iraq, Palestine). Semuhi Sinanoglu (2013: 8–9), before presenting his own cluster analysis of the region, held that one of the earliest attempts to create a typology for MENA was Guy Grossman (2007), who suggested that the countries in the period from the 1950s to the 1980s fell into three groups: a redistributive-republican regime (Egypt, Tunisia, Algeria, Libya, Iraq); a residual, pluralist regime (  Jordan, Lebanon, Morocco); and a distributive, oil-rich, monarchical regime (United Arab Emirates, Kuwait, Saudi Arabia, Oman, Bahrain). This is very 58

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much in line with Destremau. Based on the most recent data Sinanoglu (2013: 20), did a cluster analysis and came up with the following: protective, oil-rich regimes (Kuwait, Oman, Bahrain, Qatar); non-protective oil-rich regimes (Libya, Saudi Arabia, United Arab Emirates); corporatist regimes (Morocco, Tunisia, Algeria, Egypt, Syria, Iran, Yemen); and mixed regimes (  Jordan, Lebanon,Turkey). In a single case study, Mohamed and Ezz (2014: 23) found that Egypt overlaps with the Latin American model because of its bias towards formally employed segments of the population. Similar to other regions of the global south or developing countries, the welfare state in MENA is a moving target. The original authoritarian corporatist regimes in their different variations have been seriously challenged during globalization, and many countries liberalized their economies during the 1980s and 1990s, which led to economic growth. However, it did not trickle down to the poor and remained beneficial only for the established elite while still excluding the majority of ordinary citizens (Harrigan and El-Said, 2014: 119).They showed that growth alone is insufficient to alleviate poverty. Having said that, poverty rates in the region are relatively modest: “Income poverty in the MENA region is among the lowest in the world: it is low and declining” (Ncube et al., 2013: 12).Yet, observers like the World Bank or the UNDP suggest that the region turn away from universal subsidies, which are characterized as “inefficient, and pro-rich” (Silva et al., 2012: 26). Several observers have pointed to the Arab Spring in 2011 as a new window of opportunity for changing the old social contract and exchange subsidies to the non-poor with universal services and non-contributory provisions. Hence, Naren Prasad (2014: iii) suggested that as a result of economic hardship, increasing repression, and lack of political space . . . the middle class eventually rejected the social contract and thus endangered political and social stability which led to the recent uprisings in the Arab region. The World Bank summed up the current situation thus: An analysis of household surveys revealed that many of the poor in MENA are not reached by safety nets. The region’s spending on safety nets is dominated by universal subsidies (making up, on average, 6 percent of GDP), with most of this spending going towards fuel subsidies (4.5 percent of GDP). While a SSN system based on subsidies ensures affordable access to food and fuel for all citizens and many in the region currently rely on this system to stay out of poverty, it does not promote social inclusion of the poor and vulnerable. (WB, 2015b: 1) In a future perspective the region seems ripe for a radical change away from subsidies towards more universal social policies. Whether that will also happen remains to be seen.

Sub-Saharan Africa The region in the world with the least developed systems of social protection is sub-Saharan Africa, which is reflected in the lowest share of social expenditure that has developed from 2 to 4 percent of GDP from 1990 to 2010 (ILO, 2014). On paper, nearly all states have committed themselves to provide social security in the form of old-age protection, and many have set up health care, but only for formally employed workers (Mokomane, 2013: 254). So, in reality coverage is very low; for all of Africa it was estimated to be between 22 percent and 25 percent respectively (ILO, 2014). So, “until the late 1990s, a few countries have managed to 59

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establish social security institutions covering more than a fraction of workers, largely civil servants” (Niño-Zarazúa et al., 2012: 164). Zitha Mokomane echoes this judgment when stating that “social protection programs remain more the exception than the rule in the region” (2013: 255–256). There exists a high degree of diversity reflecting both different colonial legacies and different levels of economic and political development. The former has meant that what used to be French colonies, for instance West Africa, have more emphasis on family allowances than former British colonies, for instance in East Africa (Schmitt, 2015: 335).The relatively high level of economic development in Southern Africa has meant that this subregion has the highest coverage of social protection, which has also been identified as a “transposition of the European model of social assistance to South Africa” (Niño-Zarazúa et al., 2012: 169). On the whole it is under-developed, however, and consequently sub-Saharan Africa “is the region in the world with the lowest access to basic social services” (Mokomane, 2013: 255). Miguel Niño-Sarazúa et al. identified two models of social assistance in sub-Saharan Africa: “one model based on age-based social transfer programs dominates in the middle income countries of Southern Africa; and a second model based on social transfer programs targets extreme poverty” (2012: 164). The latter includes conditional cash transfer schemes as we know them from Latin America, and they seem to indicate a new wave of social protection substituting the otherwise preferred form of protection – emergency food aid and humanitarian responses to problems of food insecurity. A similar distinction was suggested by Frank Ellis: “self-targeted ‘safety net’ approach, the poverty-targeted approach and the universal provision approach” (2012: 211), where the first one equals the traditional food aid programs, the second one equals the targeted approach and the third one equals the age-based social transfer programs. In sub-Saharan Africa it has been more difficult than anywhere else to get social protection onto the political agenda. If this trend is not reversed, the future of social protection looks bleak in the region. We expect conditions to improve across the region, but within the next 30 years it is only Southern Africa that is expected to have developed considerable coverage regarding health care and old-age security. Areas such as family allowances and unemployment benefits are expected to remain rudimentary. Hence, a full-fledged welfare state is not foreseen for most of sub-Saharan Africa in the foreseeable future.

Generalizing trends in welfare development: universalism, social investment and welfare mixes From an ideational perspective there is a continuous and growing support for comprehensive welfare systems. People in general support the welfare state in its various forms, which is demonstrated again and again in surveys – and in most places, people are voters. It is no longer so, if it ever was, that it is only the political left that supports welfare systems, while the right suggests tax cuts and austerity. Most political parties will, ideally, support collective systems of risk insurance, and this is even more outspoken when consulting the international organizations that try and guide and influence national governments. Neoliberalism is no longer the “new black.”The Washington-based international organizations gave up that perspective around 1997 and have since then promoted what can best be described as the social investment state perspective. Here the state is obliged to safeguard investment in citizens so that their human capital is sufficiently high to be able to contribute to the production in society. Welfare entitlements no longer refer to an obligation to secure everybody a life in decency free of poverty, rather the reference is to the necessity of having available a healthy, well-educated and secure workforce as an important element in staying competitive in an increasingly global economy.This is obtained through basic 60

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health care, education and social security; again, not because we love or feel sorry for the poor, but because we need good workers to keep the capitalist market economy running. A very tangible illustration of this approach is the proliferation of conditional cash transfer schemes across the regions of the world. Other international organizations, notably the UN, go one step further and support a universal approach to welfare policies. This is clearly the case with ILO, UNDP and ECLAC. Included in their welfare strategies is an emphasis on gender equality, non-discrimination, anticorruption, support of sustainable development in its three dimensions, and a growing focus on care deficits as a welfare issue calling for a strong support for family policies. We know that, historically, family policies are the last set of policies introduced in the welfare state. Welfare policies come in sequence, as Christopher Pierson (2005) has reminded us, starting with industrial accident insurance, followed by health care and pensions; last comes unemployment and family benefits. This sequence applies to all welfare states and indicates that an emphasis on family policy announces a mature, comprehensive welfare state, and that is exactly what these organizations promote. More generally, UN foresees a world where poverty has been eradicated and where inequality has been tamed. So, if the UN could decide the future of welfare systems it would be a bright one.

General tendencies in Europe and the OECD Extrapolating dominating trends in welfare systems of the real world is more complex than tracing the ideational currents. In the OECD-area the liberal welfare states have behaved more social liberal than neoliberal, and the US has, finally, embarked on a road to universal health care. Furthermore, when social protection expenditure is calculated as net social expenditure, the US moves from number 23 to number five in the ranking among all OECD countries; from spending 17.4 percent of GDP to spending 27.5 percent (Adema et al., 2011). Irrespective of method of calculation all OECD states have expanded their spending on social protection every year since such policies were introduced. Sometimes this has not shown up in calculations relative to GDP, but that is because the latter has grown faster than the former. The advanced welfare states in this region have consolidated their social protection efforts around 25–30 percent of their GDP, which means that in absolute terms, measured per capita, social budgets increase in tandem with growth rates every year. We have found no evidence to suggest that this development should not continue into the foreseeable future. But this general trend masks changes in the composition and organization of entitlements and provisions, supporting the insight that in order for welfare states to survive they have to change. In the European case we have observed a pluralization and a weak convergence of welfare systems, meaning that, for instance the Scandinavian regime has been inspired by the Continental one to put more emphasis on contributory elements, thus weakening universalism which is otherwise the hallmark of the Scandinavian regime. The Continental regimes, on the other hand, have been inspired by Scandinavia in their efforts to expand care services through public provision, thus weakening the contributory element, and Eastern and Southern Europe have shown a general tendency of catching up. But all these changes have taken place within a welfare mix approach where the various regimes become less distinct over time because of the pluralization of approaches within all regimes.The most dominant trend in development of welfare systems in Europe and the OECD-area has been steady growth within a framework of pluralism and flexibility, rather than austerity and cutbacks. Particularly regarding Europe, the European Union has adopted fair and square the social investment strategy, thus stipulating a safeguard of basic entitlements and provisions for the “active citizens.” 61

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Before this turns into a too rosy picture of the future, it is important to add to these general trends other tendencies that point in different directions.The policies that have been safeguarded are those who cater to middle-class family and core workers, while policies targeting the marginalized have been cut in many places. Hence, immigrants, refugees, youth, some women, and unskilled segments of European welfare states have seen their living conditions deteriorating because of insufficient public support. Thus another general tendency has been a dualization of welfare states into a comprehensive contribution- and rights-based system of entitlements for the middle classes and other well-integrated citizens on the one hand, and on the other hand a selective, means-tested and lean system of social control policies towards the marginalized with an emphasis on mandatory labor market activation. Thus the future welfare state system in Europe is one of fairly generous and very comprehensive entitlements providing risk management for the integrated middle classes together with policies that act as social control of the poor and marginalized. Richard Titmuss’s (1971) dictum that “services for the poor tend to be poor services” is expected also to be valid in the future.

General tendencies in Latin America Had this exercise on telling the future been carried out 15 years ago considering data from 1980 to 1995 in Latin America, the extrapolated tendencies would have been very gloomy. However, as is also the case for Asia-Pacific, in this region the welfare state is a moving target, and what we saw analyzing the period from the 1990s and till now was one of introduction and expansion of entitlements and provisions together with a substantial reduction of poverty and a consolidation of inequality. Chile and Mexico are already members of OECD, Costa Rica and Colombia are in the process of accession, and Brazil is associated in a partnership suggesting that at least parts of Latin America will follow general trends within OECD. The regional UN organizations, particularly ECLAC, are strongly promoting universalization of welfare systems, and the general trend in the whole region is one of expansion and consolidation of welfare systems rather than one of rolling and cutting back. Yet, diversity is huge in Latin America and the poorer familistic welfare states still have a long way to go before social citizenship is exercised as a right for everyone. The major problem being that social insurance entitlements are connected to formal labor market participation, which in reality excludes most of the rural and much of the female population. The question of informality also applies to the more developed state productivist welfare regimes in the region, while some of the state protectionist regimes (Argentina, Chile and Uruguay for instance) have facilitated social insurance for domestic workers, a huge otherwise unregulated female dominated sector across Latin America. Breaking the dominance of informality is also the continuous expansion of conditional cash transfer schemes which are women oriented and focus on the core elements of the social investment strategy: health care and education. Perhaps the most serious question with respect to the welfare of citizens is the consolidation and expansion of inequality which has been a dominant trend across the globe. The good news is that Latin America is the only region where there has been a fall in resource inequality, from income Gini 0.533 in 2005 to 0.497 in 2012, but the bad news is that Latin America is still the most unequal region in the world, and a number of countries have income Ginis above the already very high average of 0.5 such as Chile, Colombia, the Dominican Republic and Paraguay. What the future has in store for Latin Americans also depends on how tax systems are expected to evolve. If the countries in the region are to increase universal welfare systems they are bound to raise more public revenues.This may happen. From 1990 to 2009 the average taxation rate in the region increased from 14 to 19 percent of GDP, but when disaggregated it was 62

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the categories of personal income and capital gains and VAT that contributed to the increase, other tax sources remained the same or shrank. We can then expect taxes to continue to be regressive in Latin America contributing to higher revenues but also to maintenance of high levels of inequality. Regarding care deficits and women Latin American future looks less bright. Rights of women and their equal treatment are challenged by the persistence of a culture of machismo. There are signs of change facilitated by for instance a low-fertility equilibrium among middleclass women in the more advanced states exercising pressure on their states to provide public care arrangements, but it is anybody’s guess how far that will take Latin America towards profound changes. One more thing to consider is the future influence of regional organizations. Overall, we subscribe to the idea that globalization, to a very large degree, shows itself in the form of regionalization. Most exchanges and communication take place within regions, rather than between regions. The European Union is the most advanced regional organization today and it has been seen as a role model for regional integration, securing peace, security and prosperity. As demonstrated Latin America has a host of regional organizations all committed to safeguarding and improving the welfare of all citizens in the region. If these organizations are granted more sovereignty and decision making capacities in the future, it is good news for people in the region. That, however, remains to be seen.

General tendencies in the Asia-Pacific For the poorer parts of the Asia-Pacific region we anticipate a slow improvement in social citizenship rights. Unlike OECD and Latin America, there is no long historical tradition for public welfare policies, and the region has demonstrated that it can develop fairly harmonious and prosperous societies without huge welfare budgets. In the more advanced parts of the region, particularly in East Asia, there are mounting pressures for enhancing both traditional social security arrangements and new care services, and the extremely low fertility rates in those subregions already exercise a huge pressure for collectivizing care services. But we also anticipate that the productivist orientation of welfare policies will be continued, indicating a limited scope for universal policies. Rather expansion is expected within the traditional social insurance systems of contributory health care and pension systems. One element of earlier achievements is expected to be continued and that is the comprehensive emphasis on education now being supplemented with an aim towards innovation. Part of Asia’s economic prosperity is explained by the existence of a well-educated workforce. The decisive role of the extended family is also under pressure because of internal migration and dissolution of the three-generation household. Yet, we expect family ties to be very important for the welfare of the individual in the foreseeable future, and the argument is based on an assumption of the stickiness of culture. Throughout the region the family has been the central pillar of community for thousands of years as expressed through dominating religion and politics. Intergenerational transfers are expected also in the immediate future to be of outmost importance for the well-being of Asians. What we labeled the inclusive developmental welfare regime is the one we expect to maintain expenditure levels on par with similar OECD countries and expanding them relatively in the short run and absolutely also in the long run. Differently with the selective developmental welfare regimes, they are expected to continue on a dual structure with adequate protection for formally employed citizens, and very limited provision and no entitlements for the marginalized people and migrants. 63

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Whatever is going to happen in the region in the future very much depends on what will happen in China. On the one hand, China has committed itself to developing a universal welfare system. On the other hand, it has developed a dual system with different levels of generosity for urban and rural citizens respectively, and all major systems are built on contributions from labor market actors. We expect the reality of differentiated contributory systems to dominate in the foreseeable future, rather than the idea of a universal welfare state. The hukou system is under tremendous pressure and we expect social protection for migrants to be implemented in the foreseeable future. We also anticipate mounting pressure from modern urban nuclear families resulting in some coverage of public collective care services for children, the elder population and persons with handicaps. Currently, hardly any public services exist to help parents coping with the issue of caring for a child with a handicap – a situation China shares with its neighbors in the region – and services for frail elder population and preschool children are grossly inadequate. They will also be in the immediate future, but less so. The strongest motivating factor for the Chinese Communist Party’s commitment to welfare state development was the rapid increase in resource inequality that followed from opening up the economy since the late 1970s. Apart from the city states of Hong Kong and Singapore that have the highest Ginis in the whole region – 0.54 and 0.48 respectively – China is with an income Gini of 0.42 the fourth most unequal state in the region, surpassed only by Malaysia, the Philippines and Fiji, and quite some way from the average of 0.36. There is no indication that inequalities will diminish by themselves, and we expect this to continue to apply a pressure on Chinese authorities towards strengthening the welfare system. Like the other regions, the Asia-Pacific is encapsulated in regional organizations of cooperation and integration. We foresee these institutions to grow in importance in the region, and to the extent that cooperation revolves around free trade agreements that will spill over into enhanced labor rights, as we have seen in the immediate past elsewhere.

General tendencies in North Africa, the Middle East and sub-Saharan Africa The MENA region is on the one hand one with low levels of poverty and relatively high levels of government spending. On the other hand it is a region together with sub-Saharan Africa that is most plagued with civil conflict, war and personal insecurity. Generally, crises have proven supportive of expansion of social rights and social protection, while war has not. It would take radical reforms to change the precarious situation of many vulnerable groups, and there are indications that such reforms are under way, but they are preconditioned a more peaceful development with more respect for rights of women and immigrants.

Another take on differentiating the world: the BRIC countries When generated in the early 2000s the BRIC thesis (covering the countries of Brazil, Russia, India and China) suggested that China and India will, by 2050, become the world’s dominant suppliers of manufactured goods and services, respectively, while Brazil and Russia will become similarly dominant as suppliers of raw materials. Due to lower labor and production costs, many companies also cite BRIC as a source of foreign expansion opportunity, and promising economies in which to invest (IP, 2015). More recently, South Africa has joined the club, hence making it BRICS. Ian Gough has together with Göran Therborn (2010) speculated how social policies might develop in the global south to some extent drawing on a cluster analysis that Abu Sharkh and Gough (2010) did on 65 countries outside of the OECD based on 2000 data. At that time, 64

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in their analysis, the global south consisted of eight clusters: the first was labeled proto-welfare states and includes the former Soviet Union countries and the Southern Cone countries in South America; the second cluster included China and most of East Asia; South Africa was located in the fourth cluster and India in the fifth. This indicates “a highly variegated pattern of welfare and illfare systems across the global south and even among the BRICs” (Gough, 2013: 6). Gough and Therborn (2010) concluded that first, the developmental path of European welfare states is not likely to be repeated; second, the global south already has a number of social programs in place, but they have not yet coalesced into an alternative “social policy model”; and third, these programs are likely to expand, but along their own paths. Similar conclusions were reached by Danny Pieters and Paul Schoukens (2012: 162) when they warned us that we must not make the mistake that the challenges being comparable, the ways to address them may be similar. . . . In the BRIC countries the main challenge consists of bringing more people under social security by transferring them from the informal to the formal sector. Furthermore, the lack of a coherent social policy paradigm is another challenge, and it reflects the various intensions associated with welfare among this group of countries, for instance the privileging of civil servants. Internal diversity, particularly along the urban-rural divide is yet another challenge. Demographic changes in the form of new family patterns and graying of societies (in Russia, China and Brazil) and population growth (in India) must also be considered. Gough and Therborn (2010: 714–715) summed up profound challenges to the global south in nine issues, where five of them mostly refer to sub-Saharan Africa (disease and ill-health (AIDS), malnutrition, poverty, unsustainable population growth, urban amenities including clean drinking water), while systematic discrimination of girls and women, financial dependence on rent and climate change are common, and old age are challenges mostly in China and East Asia.

Conclusion: an uneven race to the top and/or a polarized world? To sum up: challenges are global; solutions must be local. Among the global challenges the following are the most pressing. First and foremost, all welfare state expansion hitherto has been accompanied by economic growth, but the way we have pursued the latter has led to unsustainable environments, which in itself is a threat to peoples’ well-being. Hence, in the future we have to combine welfare development with sustainable growth. That may be possible. The literature to date has shown three important things with respect to welfare and growth: (rapid) economic growth does not necessarily spill over into expanded social citizenship (as demonstrated by the East Asian case); but when it does it does not threaten international competitiveness (as demonstrated by the European case); and abundant social spending does not necessarily go to the needy, but can go to the privileged (in the case of MENA). The question of resources is and remains a political question, not an economic one. So, if there is a will, there is a way. Unfortunately, despite the overall popularity of social protection among citizens as all surveys have revealed, there are social forces that actively combat social solidarity on political ideological grounds or out of misperceived egoistic behavior. A precondition for developing an elaborate welfare system seems to be a stable social contract. It was suggested that such a new social contract has come about in the OECD countries revolving around the idea of the social investment state, but in other regions, such as MENA and sub-Saharan Africa, the old social contract has been dropped, but yet without an alternative one in place. 65

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Second, demographic developments are challenging, but in different ways in different places. In the OECD countries and the rest of East Asia the share of old citizens indicates higher expenditures on health and old-age care, which already consume the large majority of budgets everywhere. So, more resources are needed in the future. It is different in sub-Saharan Africa where population growth is still high and considered another kind of challenge. Third, the degree of war or peace within a given territory is determining for welfare outputs, and war and peace are very unevenly distributed across the globe with sub-Saharan Africa and the MENA region the most challenged. Strongly connected to the issue of war and civil conflict is the issue of international migration, which again is either considered part of the problem, as demonstrated by current xenophobic reactions in Europe, or part of the solution to the challenge of a shrinking labor pool in the global north – an understanding promoted by for instance employers’ organizations. OECD countries are expected to continue their consolidation and absolute expansion of welfare entitlements and provisions. As regards the global south, Gough and Therborn (2010: 714) concluded: In central and parts of eastern Europe and parts of South America, despite serious erosion of their traditional welfare systems, we see a potential for new forms of social citizenship. In much of east and southeast Asia, much of Latin America, Iran, Turkey and possibly other parts of the MENA region, we find distinctive, different yet moderately effective informal welfare systems alongside small state sectors. In the Indian subcontinent, there is a plethora of formal and informal programmes but with little realization in terms of spending, delivery or welfare outcomes. In much of sub-Saharan Africa, what social programmes there are have been eroded and submerged beneath a rising tide of human need; this remains a zone of high insecurity and illfare. We do not expect the whole world to turn into a copy of Scandinavia, with its universal welfare state, in the immediate future just because ECLAC or UNDP suggest so. But we are absolutely convinced that we can expect more, not less, welfare state in the future, and it will, to some extent, follow the path-dependent course of the welfare regime it belongs to. The changes that we foresee in the otherwise stipulated development are a pluralization and an individualization of social citizenship, leading to a situation where the various regimes are less different: universal regimes will apply more welfare mix solutions, making it less universal over time. Contributory labor market regimes will supplement with public services making it less social insurance-only oriented. Liberal regimes will employ more public solutions, making them less liberal, and familistic regimes will slowly but steadily evolve into a mixture of universal and contributory entitlements and provisions. So far, the emphasis has been on extrapolating positive tendencies towards enhanced social citizenship; there are plenty of such tendencies within all of the regions of the world. There is, however, also a tendency of dualization of welfare systems where the vast majority of mainly middle-class citizens via a combination of contributory and universal entitlements is able to form very secure and safe lifestyles; but where a large minority of various marginalized groups more and more have to rely on handouts from the local state and charity from local NGOs which will not enable them to live a decent life. These spaces of marginality may take up subregional territories where the majority of people are de facto excluded from major institutions of social integration such as reasonable schooling, housing and work and living environments.This is a possibility for parts of West and South Asia, parts of sub-Saharan Africa, parts of the MENA region, parts of Latin America and parts of Central and Eastern Europe. These territories have 66

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the highest degrees of inequality and environmental problems, and the twin issues of environment and inequality are precisely the issues that cause the most alarm regarding the future. Environmental disasters and huge inequalities are exacerbated by war and conflict, which, again, are more prevalent in the indicated areas. If conditions worsen they will trigger more migration, primarily to North Western Europe and North America, which could lead to highly differentiated and segregated living spaces that are next to each other geographically, but worlds apart socially. Future welfare state systems will be organized according to the ideas behind the social investment state taking into consideration the original welfare regime principles which an individual country or subregion belonged to. Hence, education and health care will see close to 100 percent coverage everywhere in the foreseeable future, as will be the case for very basic retirement pensions. The majority of the populations will be able to supplement public basic provisions with occupational entitlements and private insurance, but a large minority will have to rely on handouts and charities and meager public provisions conditioned on living up to the idea of the social investment state. Simply put: we expect more of the same; inequalities will persist, but poverty will be reduced.

References Abrahamson, P. (2010), European Welfare States Beyond Neoliberalism:Toward the Social Investment State, Development & Society,Vol. 39, No. 1, pp. 61–95. ——— (2011), The Welfare Modelling Business Revisited: The Case of East Asian Welfare Regimes, in Gyu-jin Hwang (ed.) New Welfare States in East Asia: Global Challenges and Restructuring. Cheltenham: Edward Elgar, pp. 15–34. ——— (2012), Scandinavian Welfare Regime in the Current Crisis: Reform or Retrenchment? in R. T. Nielsen and G. Helgesen (eds.), Ideas, Society and Politics in Northeast Asia and Northern Europe: Worlds Apart, Learning From Each Other, NIAS Press: Copenhagen. ——— (2015), Social Rights in Latin America: Field Notes, Department of Sociology, University of Copenhagen. Abu Sharkh, M. and Gough, I. (2010), Global Welfare Regimes: A Cluster Analysis, Global Social Policy, Vol. 10, No. 1, pp. 27–58. Adascalitei, D. (2012),Welfare State Development in Central and Eastern Europe: A State of the Art Literature Review, Studies of Transition States and Societies,Vol. 4, No. 2, pp. 59–70. ADB (2013), The Social Protection Index: Assessing Results for Asia and the Pacific, ADB: Manila. ——— (2014), Key Indicators for Asia Pacific, ADB: Manila. Adema, W.; Fron, P., and Ladaique, M. (2011), Is the European Welfare State Really More Expensive? OECD Social, Employment and Migration Working Papers, No. 124, OECD: Paris. Arts, W. (2013), Welfare Regimes in an Age of Austerity, Sociologia e Politiche Soziali,Vol. 16, No. 1, pp. 9–23. Aspalter, C. (2016), Evaluating Conditional Cash Transfer Systems:The Case of Latin America and the Caribbean, in C. Aspalter and K. Teguh-Pribadi (eds.), Development and Social Policy: The Win-Win Strategies of Developmental Social Policy, Routledge: Oxon, UK. Atun, R. (2014), Health-System Reform and Universal Coverage in Latin America, Lancet, Vol.  385, No. 9974. Barrientos, A. (2004), Latin America:Towards a Liberal-Informal Welfare Regime, in I. Gough and G.Wood (eds.), Insecurity and Welfare Regimes in Asia, Africa and Latin America: Social Policy in Development Contexts. Cambridge: Cambridge University Press, pp. 121–168. Bolukbasi, H. T. (2009), On Consensus, Constraint and Choice: Economic and Monetary Integration and Europe’s Welfare States, Journal of European Public Policy,Vol. 16, No. 4, pp. 527–544. Castells, M. (1992), Four Asian Tigers with a Dragon Head: A Comparative Analysis of the State, Economy, and Society in the Asian Pacific Rim, in R. Appelbaum and J. Henderson (eds.), State and Society in the Pacific Rim, Sage: London. 67

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4 The Australian welfare state system With special reference to welfare conditionality – the case of the income management system Philip Mendes

Australia possesses one of the most selective income support systems in the Western industrialized world. Financial assistance is provided on a flat rate basis, funded from general taxation revenue rather than via contributions from workers and employers. In contrast to many European states, Australia did not introduce social insurance schemes whereby those who experience unemployment or sickness are protected by income replacement packages. Rather, its welfare payments are mostly means-tested, targeted to the poor and low in monetary value (Whiteford, 2010a). Australian welfare programs have generally involved a combination of public funding and private provision. This “mixed economy of welfare” includes commonwealth, state and local governments, private employers providing wages and superannuation, voluntary or non-­ government agencies, market-based services and informal care by families and individuals. Most welfare services – whether involving aged care, substance abuse, housing, child welfare, family violence or intellectual or psychiatric disability – are delivered by non-government or community organizations. It is only income security payments which have been exclusively managed by the commonwealth government (Marston et al., 2014). The Danish theorist, Esping-Andersen, has described the Australian welfare state as a residual or liberal welfare state typified by low levels of welfare spending and minimum interference with the free market (Esping-Andersen, 1990), while a more recent analysis utilizing a range of welfare state characteristics from 1973 to 2007 constructs Australia as “one of the least generous welfare states in the OECD” (Starke et al., 2014: 234). Its public social expenditure as a percentage of GDP in 2012 was 18.3 percent, leaving Australian ranked 25th out of 34 in the OECD, and below the OECD average of 21.4 (OECD, 2014a). Australia has higher levels of child poverty and income inequality than the OECD average, which suggests that its limited welfare safety net may not be sufficient to reduce poverty and inequality (OECD, 2011, 2014b). However, an alternative point of view contests the assumed link between greater social expenditure and income redistribution. That perspective argues that the Australian model provides the most effective system for reducing income inequality of any OECD country. This is 71

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because its careful targeting of benefits to needy groups (i.e. the spending on income-tested cash benefits is more than four times the OECD average) maximizes the reduction in poverty attained by any given expenditure. Australia’s ratio of benefits received by the poorest groups compared to the benefits received by the richest groups was 12.4 percent in 2005 as opposed to the OECD average of 2.1 percent. Consequently, Australia is particularly successful in redistributing income to the poorest 20 percent of the population (Whiteford, 2010a, 2010b: 533).

Historical background Early historians depicted Australia as a “working man’s paradise” in which disparities of wealth were far less prevalent than in the old world. Motivated by the philosophical concept of a “fair go,” Australian governments introduced legislation in the early 20th century both to protect the rights and conditions of workers and to provide direct payments to the aged and disabled (Mendes, 2008; Pierson and Leimgruber, 2011). This unique welfare state model was called a “wage earner’s welfare state” because it concerned itself primarily with the protection of wage levels (at least for white male breadwinners) rather than the provision of supplementary welfare benefits. The Australian model contrasted with both the residual model of welfare because Australia had a minimum living wage, and the institutional model of welfare because full inclusion in the system depended on one’s status as a wage earner rather than one’s status as a citizen (Castles, 1985: 102–103). The key legislative and program components of the Australian welfare state were introduced between 1941 and 1945. They included child endowment, funeral benefits for deceased pensioners, a new form of maternity allowances, widows’ pensions, unemployment, sickness and pharmaceutical benefits, and hospital and tuberculosis benefits. However, there were few additional social policy initiatives during subsequent decades, and Australian welfare spending remained extremely low by international standards, sitting at only 7 percent of GDP in 1970 compared to the OECD average of 15 percent. The election of a reformist Labor Party government in 1972 led to a greatly expanded role for government in promoting fairer and more egalitarian outcomes. This included large-scale government spending in the areas of health, housing, urban development and higher education in an attempt to improve access to these services by the disadvantaged sector of the population. A further highlight was the appointment of a Commission of Inquiry into Poverty which recommended (unsuccessfully) the introduction of a guaranteed minimum income scheme for all. Later governments focused on targeting greater assistance to those welfare recipients who were in most need, such as low-income families with children, while using means tests to reduce spending on previously universal payments, such as old-age pensions and family allowances (Mendes, 2008).

Major characteristics of the Australian welfare state system The Australian welfare state consists of a range of cash payments comprising pensions and allowances plus associated support services including family support, financial counseling and assistance to those with mental health conditions. Income security payments totaled AU$110 billion in 2012–2013, including AU$75 billion for pensions and allowances and AU$25 billion for family benefits. Just over 5 million Australians received some form of payment. The Age Pension (AU$36.3 billion) and the Disability Support Pension (AU$15 billion) constitute the largest outlays given they involve support to the largest numbers of people. A full or part-rate Age Pension is claimed by over 2.3 million people and over 800,000 people receive the Disability Support Pension. In contrast, the Newstart Allowance for the unemployed costs AU$7.5 billion. 72

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The other 12 pensions and allowances combined only account for less than 20 percent of the AU$75 billion figure. Support services cost AU$529 million (AIHW, 2013: 85–86; DSS, 2014a: 7; McClure, 2014: 25, 138–140). Pensions are paid at a higher rate than allowances (Table 4.2) with more generous conditions, and provided to people who will be reliant on income security for a significant period. The principal pensions include (see Table 4.1) the Disability Support Pension paid to those of workforce age who are unable to work at least 15 hours a week, the Parenting Payment provided to those who have responsibility for a child aged under 8 years, and the Age Pension paid to those who are 65 years or older (McClure, 2014: 25). Table 4.1 Principal income security payments: pensions Name of Payment

Eligibility

Payment Rate

Age Pension

Males aged 65 years or over, extending to 67 years by 2023; females 64.5 or older also extending to 67 years by 2023 Those of workforce age who are assessed as having a disability which precludes working more than 15 hours per week Caring responsibility for a dependent child under 8 years of age Full-time caring responsibility for a person with a disability Living in hardship with no alternative source of income

$813 per fortnight including Pension Supplement, or $19,916 per year

Disability Support Pension

Parenting Payment (Single)

Carer Payment Special Benefit

Same rate as age pension except for those under 21 years of age

$742 per fortnight including Pension Supplement $118 per fortnight $515 per fortnight

Source: Adapted from Ziguras (2014) and AIHW (2013).

Table 4.2 Principal income security payments: allowances Name of Payment

Eligibility

Payment Rate

Newstart Allowance

Unemployed and aged over 22 years Unemployed and aged 16–21 years; parental means test applies unless assessed as living independently Full-time student aged 16–24 years including parental income test Full-time student aged 25 years or above Caring responsibility for a dependent child aged under 6 years; either married or in a de facto relationship

$515 per fortnight, or $13,273 per year $414 per fortnight, or lower for those under 18 years

Youth Allowance

Youth Allowance (student)

Austudy Parenting Payment (partnered)

$414 per fortnight

$414 per fortnight $465 per fortnight

Source: Adapted from Ziguras (2014) and AIHW (2013).

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Philip Mendes Table 4.3 Principal income security payments: family payments Name of Payment

Eligibility

Payment Rate

Parental Leave Pay

Primary carer of a child who worked for 10 of the 13 months prior to birth or adoption Caring responsibility for child under 20 years

$641 per week

Family Tax Benefit (A)

Family Tax Benefit (B)

Families with one principal wageearner who have a dependent child under 16 years, or a full-time dependent student under 18 years

$230 per fortnight for child aged 13 years or over, and lower rate for younger children $150 per fortnight for children under 5 years, and lower rate for children 5–15 years

Source: Adapted from Ziguras (2014), AIHW (2013), Centrelink (2014).

Additionally, there are family payments (Table 4.3). Family Tax Benefit A is a means-tested payment available to families with a dependent child under 21 or a full-time dependent student between 21 and 24, and is particularly targeted at assisting lower-income families who have secured paid work. More than 1.6 million families claim the Family Tax Benefit A. In contrast, Family Tax Benefit B is a means-tested payment available for single-income families, both to sole parents and to families with one main wage earner with a dependent child under 16 or a full-time dependent student till 18 years. About 1.4 million families claim the Family Tax Benefit B (AIHW, 2013: 86). All payments are subject to a means test which incorporates both income and assets. Additionally, those who work casually or part-time experience a major reduction in their benefit rate. Those receiving allowances encounter a higher withdrawal rate than pensions in order to provide recipients with an incentive to move into full-time employment (Ziguras, 2014). The pension rate is indexed to 27.7 percent of male total average weekly wages which correlates with the income of the majority of the population. In contrast, allowances are only indexed to inflation as measured by the Consumer Price Index (CPI). This difference in indexation via wages versus prices reflects the different stated aims of the respective payments (i.e. long-term support versus short-term poverty relief ). A consequence of this different approach is that the gap between pensions and allowances continues to rise given that average earnings increase more rapidly than the CPI (Ziguras, 2014). The Newstart Allowance was 91 percent of the pension rate in 1997, but has now declined to a proportion of 62 percent (Goldie, 2014). This gap is contentious given that a large number of Newstart recipients now receive the payment long-term. For example, the number on Newstart for more than a year doubled from 2008 to over 525,000 in 2014 comprising more than two thirds of the total number of 746,000 Australians on Newstart Allowance (Department of Social Services, 2014b). Even a recent government report acknowledged that the growing gap between pension and allowance rates was problematic, and that allowance rates may be too low to provide a “basic acceptable standard of living for those with no other means of financial support” (McClure, 2014: 53). Should the current indexation arrangements continue, it has been estimated that by 2050 an unemployed person would be paid little more than one-third the rate received by an aged pensioner (Whiteford, 2010a: 434). Additionally, the major difference in payment rates between the Disability Support Pension and the Newstart Allowance appears to discourage 74

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those with a disability (but some capacity for employment) from seeking work in order to retain access to the higher payment. Although the current government has claimed that welfare spending is out of control and unsustainable, the evidence suggests this may not be the case. For example, the proportion of Australians of working age reliant on income support has fallen from 25 percent in 1997 to 17 percent in 2013, while the proportion receiving the Disability Support Pension has remained steady over the past 10 years. The proportion receiving Parenting Payment single or partnered has fallen significantly over the past decade and a half (McClure, 2014: 162–163).

Fiscal or dual welfare In addition to direct income security and family payments, the government also provides major funding via social tax expenditures (STEs) – that is reduced levels of taxation via deductions or rebates – to mostly middle- and higher-income earners. These expenditures include the childhood tax rebate, concessional taxation of superannuation, the private health insurance rebate, the non-taxation of capital gains for principal residence, the non-taxation of imputed rent and the first home owners grant.The largest STEs appear to be in the housing and retirement areas.The cost of STEs increased from about AU$5 billion in 1985/1986 to AU$43 billion in 2007/2008, and rose as a proportion of total public spending from about 7 percent in 1985/1986 to 12 percent in 2007/2008 (Stebbing, Spies-Butcher, 2010: 591). These payments are often excluded from estimates of welfare spending, and the former coalition Prime Minister John Howard specifically denied that they were a form of middleclass welfare. But it seems evident that these payments are a “second tier” of welfare, and that Australia has developed a “dual welfare state” (Stebbing et al., 2010: 600). As I note further, those reliant on the first tier of payments such as the unemployed, single parents and disability support pensioners are subjected to increasingly stringent conditions. In contrast, the second tier of welfare is arguably regressive given it largely involves a transfer of income from the less affluent to the more affluent. Yet it is provided with few conditions on the behavior of applicants who are encouraged to choose their preferred (and heavily subsidized) private welfare service provider (Stebbing et al., 2010; Wilson et al., 2012; Marston et al., 2014).

The initial neoliberal transformation (1996–2007) The conservative Liberal-National Party coalition government that ruled Australia from 1996 to 2007 was strongly influenced by a neoliberal ideological agenda. This agenda influenced their commitment to reducing social expenditure, and redirecting responsibility for the provision of welfare services to the disadvantaged from government to business, nongovernment charities and community service providers, private individuals and families. The government constructed a new public debate around the welfare system and welfare recipients based on narrow notions of individualism and self-reliance (Carson and Kerr, 2014). There was no longer any serious discussion about the collective obligation of the state and community to defend the rights of the poor and disadvantaged, or about the specific role of the welfare system in promoting greater equity. Rather, income security payments were increasingly viewed as a means of social control designed to integrate recipients within the frameworks and values of the free market. The coalition’s welfare retrenchment policies are best discussed within a four-part framework which reflects the broader neoliberal critique of the welfare state. 75

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The silencing of advocacy groups According to public choice theory, self-interested lobby groups capture the welfare state in order to manipulate the redistributive process to their own advantage. These producers of the welfare services (it is argued) have a vested interest in maintaining and expanding welfare programs that have little to do with assisting disadvantaged consumers or alleviating poverty and far more to do with enriching themselves. Hence, they should be excluded as far as possible from public policy debates (Bennett and Di Lorenzo, 1985: 6, 182). Accordingly, the coalition government de-funded a number of welfare advocacy groups such as the Australian Youth Policy and Action Coalition and the housing lobby group National Shelter, and sought to limit the access and influence of other interest groups such as the peak community welfare body – the Australian Council of Social Service (ACOSS) – which were in receipt of government funding (Maddison et al., 2004). For example, the government issued a statement in August 1999 requesting that funded bodies work collaboratively with the Department of Family and Community Services, and provide early warning for all controversial issues planned for media coverage that might attract public comment. This request appeared designed to muzzle funded bodies by reducing them to agents of government rather than autonomous vehicles for community participation in policy development and decision making (Moore, 1999). Additionally, the government sought to displace ACOSS by promoting a group of favored non-governmental organizations (NGOs) such as Mission Australia, the Salvation Army, Wesley Mission, Uniting Care, the Smith Family and the Benevolent Society to positions of influence. The favored NGOs seem to have the following characteristics in common: they are mainly church-based and work within a moral or religious framework, are willing to cooperate with government policy, are only minimally involved in political advocacy and do not espouse leftwing views, are willing to form partnerships with the corporate sector, are attached to deserving rather than undeserving disadvantaged groups, and are part of a long-standing charitable culture (Phillips, 2007).

Welfare dependency One of the key components of the government’s neoliberal agenda was a belief in the notion of welfare dependency. According to this concept, government welfare programs have a “perverse” effect: that is they produce poverty instead of relieving it. Neoliberals construct welfare recipients as fundamentally different from the rest of the community. Dependence on welfare is interpreted as an addiction not dissimilar to that of helpless dependence on drugs and alcohol or gambling (Harris, 2000). They argue that the state should act to motivate and discipline welfare recipients and reintegrate them with mainstream social values and morality such as self-reliance and the work ethic. Income security should shift from being a right or entitlement to a privilege. Welfare-dependent individuals should be given incentives to choose employment over welfare (Mendes, 2009a). The coalition government introduced a number of measures to eliminate alleged incentives to welfare dependency. Most of these initiatives involved the incremental tightening of access to benefits rather than wholesale changes to entitlement criteria. In September 1999, the government announced a review of the welfare system designed to prevent and reduce welfare dependency. The review was driven by two key ideological beliefs. The first concern was that Australia was spending too much on welfare payments, and that urgent measures should be taken to reduce social expenditure. Second, the coalition believed that many of the people receiving income support payments did not deserve to do so (Mendes, 2008). 76

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The then Minister for Family and Community Services, Senator Jocelyn Newman, argued in an accompanying discussion paper that dependency on social security payments had increased from around 10 percent of workforce-age Australians in 1978 to 18 percent in 1998, totaling some 2.6 million people. She described “long-term welfare dependency” as having major social and economic consequences including intergenerational welfare reliance. Newman called for a shift from long-term welfare support to greater self-reliance so that people can move off welfare more quickly (Newman, 1999). It should be noted that this increased reliance on social security payments was in part a statistical illusion reflecting a large shift from full-time work to casual and part-time work, increased divorce rates resulting in large numbers of sole parents, the introduction of supplementary payments to low-income working families and government policy changes that have widened eligibility for income support payments to new categories of people (Disney, 2004). Regardless, the welfare review report argued that income security payments should not only provide an adequate safety net, but also maximize people’s opportunities for economic and social participation (RGWR, 2000). The coalition government also consistently raised concern about the increasing number of Australians in receipt of the Disability Support Pension – up from around 300,000 in 1990 to around 700,000 in 2004. Some commentators attributed this increase to liberalized eligibility criteria that expanded beyond solely medical impairment to include job availability, while others argued that it primarily reflected a growth in the number of people with disabilities and limited job opportunities for older males (PL, 2005). Similar concerns were expressed about the sharp rise in the number of single parents receiving parenting payments over the past 20 years totaling, in 2006, approximately 450,000 out of a total population of more than 21 million. In its 2005 budget, the coalition government introduced tighter eligibility rules for the Disability Support Pension (DSP) in order to force thousands of recipients with a limited work capacity onto unemployment benefits. From July 2006 onwards, new applicants for DSP were granted the pension only if they were able to work less than 15 hours per week, reduced from 30 hours per week.Those who were ineligible for DSP would instead mainly go onto Newstart Allowance and be subject to a part-time work test (if they were able to work between 16 and 30 hours per week) (Mendes, 2009a). In addition, new applicants for Parenting Payment (PP) would be transferred to Newstart Allowance when their youngest child turned 6, and become subject to a part-time work test of at least 15 hours per week. Current recipients, however, would be allowed via grandfathering provisions to stay on Parenting Payment till their oldest child turned 16, but be required to seek work. The disabled and sole parents affected by the changes experienced a major cut in their weekly income (approximately AU$100–120 a week) given that Newstart would be paid at a lower rate than both DSP and PP with higher withdrawal rates and lower tax rebates, and they would lose pensioner concessions. They were also forced to comply with mutual obligation requirements, and the government announced, ominously, that charities would be asked to pay the rent and food of parents who had their payments suspended due to not meeting work requirements so that their children would not suffer (Mendes, 2009a).

Mutual obligation Closely associated with welfare dependency is the notion of mutual obligation. Mutual obligation reflects the influence of the 19th-century English Poor Law distinction between the deserving poor and the undeserving poor. The deserving poor – those who have become briefly dependent on poor relief through no fault of their own, and who with some assistance could return to 77

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independence – are to be cared for. However, the undeserving poor (more recently labeled the underclass) whose poverty is the result of laziness or moral failure, are to be disciplined. Neoliberals such as American political scientist Lawrence Mead argue that the permissiveness of the welfare state is the key to understanding the growth in unemployment and welfare dependency. Federal welfare programs have given benefits to their recipients, but have not asked for anything in return. Mead believes that the welfare state should be based on the concept of “new paternalism” which emphasizes contractual duties and obligations as well as needs and rights. People should be offered a combination of “help and hassle” to end the cycle of welfare dependency, and drive them into self-reliance. The principal and mandatory obligation should be to work for welfare benefits (Mead, 1997). Mead’s ideas had a significant impact on the Australian welfare reform process in that payments increasingly became conditional rather than a right. The philosophy of mutual obligation particularly inspired the introduction of the Work for the Dole scheme (WFD), which is based on the assumption that the unemployed have an obligation to give something back to society in return for the dole.The scheme does not involve any structured labor market training or education programs, but rather aims to help the unemployed to readjust to the routines and demands of the labor market.WFD removed the traditional automatic entitlement to benefits, and instead made receipt conditional on undertaking prescribed work (ACOSS, 1999). Mutual obligation was also associated with a generally punitive approach to the unemployed, reflected in both policy and rhetoric. One particular example was the introduction of tougher requirements on the unemployed including the expectation that they seek up to 10 jobs each fortnight. Recipients who failed to meet these obligations were increasingly subjected to social security breaches and associated heavy fines. Overall, there was an increase in the number of breaches from 120,000 in 1997/1998 to 346,000 in 2000/2001 – an increase of 187 percent in 3 years (CO, 2002). These breaches caused increased demand from low-income people for emergency relief and financial aid services, and placed considerable pressure on charities and community welfare agencies. The most radical application of mutual obligation was in the area of indigenous affairs. In June 2007, the coalition government announced a national emergency plan called the Northern Territory Emergency Response (NTER) for remote indigenous communities to counter an epidemic of child sexual abuse. The plan included a range of measures to tackle alcohol abuse, improve school attendance, reform public housing arrangements and quarantine 50 percent of all income support and family assistance payments. It was loosely based on a report by indigenous campaigner Noel Pearson which urged the reinstatement of social norms and personal responsibility in remote communities (Pearson, 2007).

Towards private/charitable welfare A consistent concern of neoliberals has been to reverse the modern shift to state-guaranteed income security entitlements, and instead return the provision (and if possible, funding) of welfare to families, private charities and churches. This is because charities are renowned for emphasizing the moral, rather than structural causes of poverty. Similarly coalition Prime Minister Howard had long favored greater involvement by private charities in the provision of welfare benefits and programs. Both Howard and the Treasurer Peter Costello particularly admired their emphasis on the personal and moral underpinnings of social problems, their ability to deliver programs cheaply, and their supposed capacity to promote behavioral change (Costello, 2002; Howard, 2004). Consequently, the coalition government placed charities at the center of a number of government projects. In combination with initiatives to promote greater business 78

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involvement in welfare funding and provision, these policies suggested an erosion of the traditional responsibilities of the Australian welfare state (Castles, 2001). The Job Network is the most significant and radical example of privatized welfare. The Job Network was introduced by the government in May 1998 to replace the government-run Commonwealth Employment Service (CES), and comprised about 300 commercial and nonprofit organizations which successfully competed for the right to provide government-funded employment placement services. The government argued that the Job Network would be more effective than the CES due to greater competition, increased flexibility to respond to individual circumstances, and emphasis on job placement outcomes rather than inputs. However, there appeared to be ongoing problems with referrals and registration, and the provision of adequate support for particularly disadvantaged groups (Disney, 2004). The government also strongly urged the business sector to take a more active role in the funding and provision of welfare services. In May 1999, Prime Minister Howard called for a social coalition between business, families, individuals, welfare and charitable organizations, and government to tackle social problems. Specifically, he urged the business sector to increase its contribution to the provision and funding of welfare services. He criticized business for contributing less than 5 percent of total funds available to the non-government sector, and urged the development of a greater philanthropic tradition in Australia (Howard, 1999). To encourage a higher level of business philanthropy, the government introduced a AU$51 million package of tax concessions for business contributions. It also allocated AU$13.4 million over 4 years for a Business and Community Partnerships initiative designed to strengthen the links between the corporate and community sectors. Some community groups questioned whether the government intended to use increased business donations as an excuse to reduce government spending and thereby to undermine the welfare safety net (Raper, 1998).

Welfare conditionality outlasts social inclusion (2007–2015) The Australian Labor Party (ALP) government that ruled from 2007 to 2013 did not deviate significantly from the neoliberal path. To be sure, the ALP claimed to be pursuing a social inclusion agenda aimed at promoting the participation of particularly disadvantaged groups, and established a Social Inclusion Board and associated framework to develop indicators for assessing the impact of policy initiatives.This holistic social inclusion agenda recognized that disadvantage is caused by a complex interaction of structural inequities, local community resources and individual capacity, and differed at least in principle from the former coalition government’s primary emphasis on individual responsibility (AG, 2009). The ALP softened the mutual obligation policies introduced by the coalition, and allocated substantial funds to reducing homelessness, and closed the large gap between Indigenous and non-Indigenous Australians. They also increased the weekly pension rate for single recipients of the aged pension, carer payment and the disability support pension from AU$300 a week to AU$333 a week including supplements, and introduced a paid parental leave scheme and a national disability insurance scheme (NDIS) (Mendes, 2009b; Wilson, 2013). The conceptualization of welfare under the NDIS suggests a very different ideological model to other income support payments in that it provides more, rather than less, agency and autonomy to welfare consumers through individualized funding arrangements. The basic philosophy is that individual welfare recipients should have the freedom of choice to determine their own needs, and manage their own payments and services (Chesterman, 2015). However, there remained considerable convergence between Labor Party and coalition policies (Carson and Kerr, 2014). The ALP Prime Minister Julia Gillard assumed that many 79

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unemployed Australians were not working because they chose not to. She argued that “believing in the benefits and dignity of work is a deep Labor conviction . . . Labor is the party of work, not welfare, the party of responsibility, not idleness.” She added that everyone who can work should work . . . and there are people who can work who do not . . . there is no excuse for not working . . . every Australian should pull his or her own weight . . . It’s not fair for taxpayers to pay for someone who can support themselves. (Gillard, 2011) The ALP continued the previous government’s policy of denying additional assistance to the unemployed whose payment rate declined further relative to the newly increased single aged and disability pension. Gillard justified this decision by highlighting the importance of moving disadvantaged Australians from what she called the “welfare class to the working class” (Gillard, 2014: 303–304). But Gillard’s comments ignored the fact that the poverty caused by the low rate of Newstart actively hindered the efforts of recipients to re-enter the workforce. The ALP also extended to all sole parents the previous government’s move of parenting payment recipients onto the lower rate of Newstart payments (costing them about AU$60 per week) when their youngest child turned eight. This shift threw approximately 150,000 single parents (and their children) into poverty in an alleged attempt to coax them into training or paid work (Ziguras, 2014). The most significant policy initiative of the ALP, however, was arguably the decision to continue and extend the welfare quarantining program originally introduced by the coalition government as part of the Northern Territory Emergency Response. We expand on this particular policy debate in the following case study. The coalition government that was re-elected in late 2013 has aggressively pursued neoliberal agendas. While in opposition, the future Treasurer Joe Hockey urged an end to what he labeled the “age of entitlement.” Hockey argued that Australia and other Western countries spent too high a percentage of their GDP on social expenditure compared to Asian countries, and that this level of expenditure would become unsustainable given the challenges of funding the needs of our aging population (Hockey, 2012). The coalition established a review of welfare payments to be headed by former Mission Australia head Patrick McClure. In announcing the review, the Social Services Minister Kevin Andrews argued that too many Australians, estimated at more than 5 million, were receiving income support payments; that the level of spending was unsustainable; and that significant and urgent changes needed to be made to the disability support pension and the Newstart Allowance. The minister added that the “best form of welfare was work,” and that the review would examine work disincentives in the welfare system and the different rates of payment between the Newstart Allowance and the Disability Support Pension (Karvelas, 2014). The interim report of the welfare review emphasized the negative health and social effects of long-term reliance on income security payments and inter-generational joblessness. Attention was also drawn to the need to maintain the fiscal sustainability of the system given the challenge posed by Australia’s aging population. Hence the report recommended stronger incentives to encourage workforce participation and greater self-reliance (McClure, 2014). The first coalition budget imposed significant cuts to payments and/or stricter eligibility criteria for the young unemployed, younger people with a disability and sole parents. In particular, the government introduced a new rule excluding young people aged under 30 years from receiving unemployment payments for 6 months of every year. They must also participate for 25 hours per week in WFD programs while they receive payments. To date, these harsh amendments have not been passed by the Senate. Overall, the budget seems to have had a 80

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disproportionately negative impact on people with low incomes (ACOSS, 2014). The coalition has also defunded a number of housing and disability advocacy groups including Homelessness Australia, the Community Housing Federation of Australia and Inclusion Australia.

Case study of income management The most significant example of welfare conditionality in Australia is the introduction of welfare quarantining or income management (IM). IM is the quarantining of a set percentage of income security payments – usually somewhere between 50 percent and 70 percent – into a special account for the exclusive purchase of essential household items such as food, rent, clothing and energy bills. Income managed funds cannot be used for prohibited items such as drugs, alcohol, cigarettes, gambling and pornography. IM appears to represent a fundamental shift in Australian social policy from structural to individualistic explanations of social disadvantage (ACOSS, 2010a). By August 2014 nearly 25,000 Australians were involved in IM programs. The largest group of approximately 20,000 were in the Northern Territory, of whom more than 90 percent were Indigenous Australians (DSS, 2014c). There are currently six different versions of income management. They consist of: 1

2

3 4 5

6

The Child Protection Measure (CPIM) whereby welfare recipients in the Northern Territory and parts of Western Australia are referred by a child protection officer to the Department of Human Services (DHS) to have their income managed. This measure is applied to parents who abuse or neglect their children, or who fail to ensure their school attendance. The Vulnerable Welfare Payment Recipients measure (VWPR) whereby welfare recipients in the Northern Territory are referred for income management by a DHS social worker as a result of poor financial management, family violence, mental health concerns or other factors. The Voluntary Income Management Measure (VIM) whereby people living in the Northern Territory have chosen to be involved in income management arrangements. The School Enrolment and School Attendance Measure (SEAM) applied to parents who fail to ensure their child is enrolled in or regularly attending school. The Queensland Commission (Welfare Reform) measure involving welfare recipients in Cape York whom a statutory body called the Family Responsibilities Commission has ordered should be subject to income management for engaging in dysfunctional behavior. Place-Based Income Management (PBIM) involving welfare recipients living in one of five targeted communities across Australia who have been referred for Child Protection Income Management or the Vulnerable Welfare Payment Recipients measure, or who choose to participate in Voluntary Income Management (Buckmaster and Ey, 2012; Buckmaster et al., 2012).

The aims of the range of IM programs vary from the specific to the highly general.The original aim of IM within the NTER was argued to be to protect children from abuse or neglect, and women from financial harassment and violence. An associated aim was to focus funds on essential household items such as food and clothing, and reduce or eliminate spending on substance use, gambling and pornography, which was seen to be associated with child sexual abuse. IM has also been described as a budgeting tool to assist families, particularly those with alcohol abuse or mental health concerns, to manage their finances. But the government has also suggested some much broader objectives of IM involving behavioral change such as reducing welfare 81

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dependency, promoting self-reliance and responsibility, improving parenting skills and increasing the capacity to learn work skills and potentially attain employment (Bray et al., 2012; Buckmaster and Ey, 2012). All these aims seem to target changes in the individual behavior of recipients. But these personal deficits are arguably closely related to broader structural and systemic causes of disadvantage. For example, these would include the low level of income security payments and lack of affordable housing, which push many recipients into poverty and associated family breakdown. Additionally, there tends to be minimal education, training and employment opportunities available in many of the targeted communities. However, the IM programs do not appear to recognize or address the broader structural and communal context of individual disadvantage. The existing Australian income security system legally guarantees the right of claimants who meet certain eligibility criteria to receive government cash benefits accompanied by certain obligations, and spend their payments free of any externally imposed conditions or limits. The obligations imposed have become increasingly onerous in recent years. But IM seems to take this shift to conditional welfare even further by imposing an unprecedented restriction of individual freedom in an attempt to promote behavioral change.The Department of Social Services is arguably being given judicial powers similar to those granted to guardianship authorities in cases where people assessed to have significant disabilities are unable to manage their personal or financial affairs.Yet these powers are being imposed on IM participants without any individual assessment of their capacity (ACOSS, 2010b). Additional concerns regarding IM include the high cost of administering programs, the potential for racial discrimination given the disproportionate number of Indigenous Australians subject to IM measures, and the lack of reliable evidence as to their effectiveness in meeting the stated policy aims (Mendes, 2013). The final evaluation report on IM in the Northern Territory found no evidence that it had improved food intake, financial management skills or general community well-being including child welfare. In fact, the report suggested that IM had contributed to an increasing reliance of recipients on the welfare system (Bray et al., 2014). However, the government’s welfare reform report largely ignored the poor evaluation outcomes, and recommended an expansion of IM to new target groups such as job seekers and disadvantaged young people (McClure, 2014). Additionally, the Minister for Social Services, Kevin Andrews, has canvassed an increase in the level of welfare quarantining from 50 percent to 60 or 70 percent of payments (Andrews, 2014a).

Current and future trends in Australian welfare state The current direction of the Australian welfare state seems to mirror dominant international trends, particularly those in the English-speaking “liberal welfare states” (Deeming, 2014; Standing, 2014; Marston et al., 2014). There is limited compassion for the disadvantaged, and little or no commitment to reducing poverty and inequality.The repeated mantra of governments is that welfare expenditure is not sustainable even though the statistical evidence suggests otherwise. With the exception of the NDIS which is embedded (at least in principle) in a social rights philosophy, Australian welfare policies are characterized by the following patterns: paternalistic top-down systems (exemplified by income management) that focus on individualistic (often involving moralistic judgments) rather than structural explanations for disadvantage; increasing conditionality of welfare payments involving the use of a range of sanctions to coerce the unemployed into low-wage jobs; and emphasis on discretionary (often religious-based) charitable rather than rights-based state support for those who fall through the margins (Murphy et al., 2011; Marston et al., 2014). 82

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An increasing trend in service delivery is the apparent diversion of responsibility from government to community groups. The coalition government argue that the policy solution to disadvantage lies not with government action, but rather with greater personal responsibility by the disadvantaged, and also the empowerment of local community welfare groups and civil society (Andrews, 2014b; McClure, 2014). This idea seems to reflect the influence of the British conservatives’ “Big Society” concept, and the associated “Red Tory” ideas of Phillip Blond (2010). According to former Opposition Leader and Prime Minister Tony Abbott, it is not the role of government to redistribute income or to “abolish the disappointments and failures that are part and parcel of even the best lives” (Abbott, 2012: 4). Rather, social problems are best solved by “empowering” community groups, and promoting participation by the disadvantaged in their local communities via WFD (Abbott, 2012: 4). Kevin Andrews argued in favor of a greater role for local community groups in providing welfare services. But he also spoke of the danger of non-governmental organizations relying on government funding and potentially losing their independence, and promised to promote a “culture of philanthropy.” Additionally, he praised the role of community volunteers that give “freely of their time and resources” (2013: 3). Andrews seemed to be merely suggesting that governments should devolve responsibility to community groups as a means of reducing government spending.There is no evidence here that he was proposing the introduction of genuine bottom-up community development measures that would utilize local knowledge and expertise regarding the causes of and potential solutions to social disadvantage. Rather, the coalition seemed to be suggesting a transfer of responsibility for service delivery from centralized government to local organizations, but without an associated devolution of power regarding policy making and decisions. This seems to be what has happened in Britain where the Big Society concept has mostly been characterized by harsh cuts to social expenditure, rather than any significant bottom-up transfer of power from central government to local community groups and citizens (Lewis, 2012). It has also characterized the Australian place-based income management programs which have involved centralized policies being imposed top down by distant politicians and bureaucrats on a particular location, rather than a CD approach utilizing local knowledge and expertise regarding the causes of and potential solutions to social disadvantage (Mendes et al., 2013).

Summary and conclusion Australia has a small-spending welfare state which has nevertheless enjoyed some success through effective targeting in protecting the living standards of the lowest income groups. Currently Australia spends the highest proportion of its income support bill on aged care and family payments followed by support to the disabled and the unemployed. However, social tax expenditures, which primarily assist middle- and higher-income earners, arguably form the largest single component of Australian social spending yet are rarely subject to public scrutiny. Recent governments have claimed that welfare spending is unsustainable due to Australia’s aging population, but have directed pressure almost solely at the unemployed, disabled and sole parents who are not the largest beneficiaries of welfare spending. Numerous neoliberal measures have been imposed to make payments more conditional, and subject to judgments about the good behavior of recipients. The introduction of income management for mostly Indigenous individuals and communities adds a further layer to this erosion of choice and agency. Australia seems to have given little consideration to the alternative social investment framework influencing some European countries whereby income security is instead used as a means to promote social and economic participation and opportunity (Morel et al., 2012). 83

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References Abbott, T. (2012), The Coalition’s Plan for Stronger Communities, Address to the Pratt Foundation. Melbourne, Australia, June 8. ACOSS, Australian Council of Social Service (1999), Work for the Dole – Briefing Paper, ACOSS: Sydney, AUS. ——— (2010a), Compulsory Income Management: A Flawed Answer to a Complex Issue, ACOSS: Sydney, AUS. ——— (2010b), Submission to Senate Community Affairs Legislation Committee: Inquiry into Social Security and Other Legislation Amendment (Welfare Reform and Reinstatement of Racial Discrimination Act) Bill 2009 and Related Bills, ACOSS: Sydney, AUS. ——— (2014), A Budget that Divides the Nation: ACOSS 2014–15 Budget Analysis, ACOSS: Sydney, AUS. AG, Australian Government (2009), Social Inclusion Principles for Australia, Commonwealth of Australia: Canberra. AIHW, Australian Institute of Health and Welfare (2013), Australia’s Welfare, AIHW: Canberra. Andrews, K. (2013), Remarks to Australian Council of Social Service Conference, Adelaide, March 26. ——— (2014a), Putting Welfare Dollars to Work, Australian, December 18. ——— (2014b), Address to the Tasmanian Council of Social Service, November 13. Bennett, J. and Di Lorenzo, T. (1985), Destroying Democracy, Cato Institute: Washington, DC. Blond, P. (2010), Red Tory, Faber and Faber: London. Bray, J. R.; Gray, M.; Hand, K.; Bradbury, B.; Eastman, C., and Katz, I. (2012), Evaluating New Income Management in the Northern Territory: First Evaluation Report, Social Policy Research Centre: Sydney; and Australian National University: Canberra. Bray, J. R.; Gray, M.; Hand, K. and Katz, I. (2014), Evaluating New Income Management in the Northern Territory: Final Evaluation Report, Social Policy Research Centre: Sydney; and Australian National University: Canberra. Buckmaster, L. and Ey, C. (2012), Is Income Management Working? Parliamentary Library: Canberra. Buckmaster, L.; Ey, C., and Clapdor, M. (2012), Income Management: An Overview, Parliamentary Library: Canberra. Carson, E. and Kerr, L. (2014), Australian Social Policy and the Human Services, Cambridge University Press: Melbourne. Castles, F. (1985), The Working Class and Welfare, Allen & Unwin: Sydney, AUS. ——— (2001), A Farewell to Australia’s Welfare State, International Journal of Health Services, Vol. 31, No. 3, pp. 537–544. Centrelink (2014), A Guide to Australian Government Payments: 20 September–31 December 2014, Australian Government Department of Human Services: Canberra. Chesterman, J. (2015), Modernising Adult Protection in an Age of Choice, Australian Journal of Public Administration,Vol. 73, No. 4, pp. 517–524. CO, Commonwealth Ombudsman (2002), Social Security Breach Penalties: Issues of Administration, Commonwealth Ombudsman: Canberra. Costello, P. (2002), Address to the Salvation Army Red Shield Appeal Launch, April 16. Deeming, C. (2014), Foundations of the Workfare State – Reflections on the Political Transformation of the Welfare State in Britain, Social Policy & Administration, doi:10.1111/spol.12096. DSS, Department of Social Services (2014a), Income Support Customers: A Statistical Overview 2013, Commonwealth of Australia: Canberra. ——— (2014b), Labour Market and Related Payments, December 2014, http://www.dss.gov.au/lmrp. ——— (2014c), Income Management Summary – 29 August 2014, Commonwealth of Australia: Canberra. Disney, J. (2004), Social Policy, in Robert Manne (ed.), The Howard Years, Black: Melbourne, AUS. Esping-Andersen, G. (1990), Three Worlds of Welfare Capitalism, Polity Press: Cambridge. Gillard, J. (2011), The Dignity of Work, Address to Sydney Institute, April 13. ——— (2014), My Story, Knopf: Sydney, AUS. Goldie, C. (2014), Payment Gap Is at the Heart of the Problem with Our Welfare System, Australian Financial Review, July 8. 84

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Harris, P. (2000), Participation and the New Welfare, Australian Journal of Social Issues, Vol. 35, No. 4, pp. 279–300. Hockey, J. (2012),The End of the Age of Entitlement, Address to Institute of Economic Affairs, London, April 17. Howard, J. (1999), Building a Stronger and Fairer Australia, Address to the Australia Unlimited Roundtable, Melbourne, May 4. ——— (2004), Address to the Wesley Mission’s Easter Launch, April 8. Karvelas, P. (2014), Welfare Must Be Reined In: Andrews, Australian, January 21. Lewis, D. (2012), Conclusion: The Big Society and Social Policy, in A. Ishkanian and S. Szreter (eds.), The Big Society Debate, Edward Elgar: Cheltenham. Maddison, S.; Denniss, R., and Hamilton, C. (2004), Silencing Dissent, The Australia Institute: Canberra. Marston, G.; McDonald, C., and Bryson, L. (2014), The Australian Welfare State, Palgrave Macmillan: Melbourne, AUS. McClure, P. (2014), A New System for Better Employment and Social Outcomes: Interim Report of the Reference Group on Welfare Reform to the Minister of Social Services, Commonwealth of Australia: Canberra. Mead, L. (1997), The Rise of Paternalism, in L. Mead (ed.), The New Paternalism, Brookings Institution: Washington, DC. Mendes, P. (2008), Australia’s Welfare Wars Revisited, UNSW Press: Sydney, AUS. ——— (2009a), Retrenching or Renovating the Australian Welfare State: The Paradox of the Howard Geoliberalism, International Journal of Social Welfare,Vol. 18, No. 1, pp. 102–110. ——— (2009b), Is Social Inclusion Just a New Buzzword? A Half Time Report Card on the Social Welfare Policies of the Rudd Government, Practice Reflexions,Vol. 4, No. 1, pp. 27–39. ——— (2013), Compulsory Income Management: A Critical Examination of the Emergence of Conditional Welfare in Australia, Australian Social Work,Vol. 66, No. 4, pp. 495–510. Mendes, P.; Waugh, J., and Flynn, C. (2013), A Community Development Critique of Compulsory Income Management in Australia, Alternativas, No. 20, pp. 23–40. Moore, C. (1999), Who Calls the Shots? – The Independence of Peak Organizations, Impact, August, p. 12. Morel, N.; Palier, B., and Palme, J. (2012), Towards a Social Investment Welfare State, Policy: Bristol. Murphy, J.; Murray, S.; Chalmers, J.; Martin, S., and Marston, G. (2011), Half A Citizen: Life on Welfare in Australia, Allen & Unwin: Sydney, AUS. Newman, J. (1999), The Challenge of Welfare Dependency in the 21st Century, Department of Family and Community Services: Canberra. OECD (2011), Society at a Glance, http://dx.doi.org/10.1787/888932381893. ——— (2014a), Social Expenditure Update, http://www.oecd.org/social/expenditure.htm. ——— (2014b), OECD Family Database, http://www.oecd.org/social/family/database. Pierson, C. and Leimgruber, M. (2010), Intellectual Roots, in F. G. Castles, S. Leibfried, J. Lewis, H. Obinger and C. Pierson (eds.), The Oxford Handbook of the Welfare State, Oxford University Press: Oxford. Pearson, N. (2007), From Hand Out to Hand Up, Cape York Institute for Policy & Leadership: Cairns, AUS. Phillips, R. (2007),Tamed or Trained? The Co-option and Capture of Favoured NGOs, Third Sector Review, Vol. 13, No. 2, pp. 27–48. PL, Parliamentary Library (2005), Disability Support Pensioners, 1984–2004, Parliament of Australia: Canberra. Raper, M. (1998), Reform: The Business of Philanthropy, Impact, December, p. 3. RGWR, Reference Group on Welfare Reform (2000), Participation Support for a More Equitable Society, Department of Family and Community Services: Canberra. Standing, G. (2014), A Precariat Charter: From Denizens to Citizens, Bloomsbury: London. Starke, P.; Kaasch,A., andVan Hooren, F. (2014), Political Parties and Social Policy Responses to Global Economic Crisis: Constrained Partnership in Mature Welfare States, Journal of Social Policy,Vol. 43, No. 2, pp. 225–246. Stebbing, A. and Spies-Butcher, B. (2010), Universal Welfare by Other Means? Social Tax Expenditures and the Australian Dual Welfare State, Journal of Social Policy,Vol. 39, No. 4, pp. 585–606. Whiteford, P. (2010a), The Henry Review and the Social Security System, Australian Economic Review, Vol. 43, No. 4, pp. 429–436. ——— (2010b), The Australian Tax-Transfer System: Architecture and Outcomes, Economic Record,Vol.  86, No. 275, pp. 528–544. 85

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Wilson, S.; Meagher, G., and Hermes, K. (2012), The Social Division of Welfare Knowledge: Policy Stratification and Perceptions of Welfare Reform in Australia, Policy & Politics,Vol. 40, No. 3, pp. 323–346. Wilson, S. (2013 or 2014),The Limits of Low-Tax Social Democracy? Welfare,Tax and Fiscal Dilemmas for Labor in Government, Australian Journal of Political Science,Vol. 48, No. 3, pp. 286–306. Ziguras, S. (2014), Social Security Policy: Doing More With Less? in A. McClelland and P. Smyth (eds.), Social Policy in Australia, Oxford University Press: Melbourne.

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5 The American welfare state system With special reference to asset- and means-tested social assistance programs Peter Abrahamson

The US welfare state system has been characterized in a number of ways, mostly unflattering, such as residual, a laggard, belated and exceptional (Prasad, 2016). The most authoritative label, however, is that of a liberal welfare state, which is what Gøsta Esping-Andersen named the American experience in his seminal work The Three Worlds of Welfare Capitalism (1990). The United States appeared prominently in his analysis being highlighted as the proto-typical liberal welfare state system dominated by a strong poverty orientation, a huge role for the market via insurance schemes and a large voluntary sector. The understanding was that markets and civil society compensated for the small role of government resulting in a society where welfare policies did not do much to change the initial unequal distribution of resources and, to a large extent, left people to depend on private solutions to social problems and risks. Indicators of a liberal welfare state system are high levels of poverty and low levels of social spending, or in the methodology of Esping-Andersen, little influence on social stratification because of low levels of decommodification. Some 25 years later this picture, in the main, still holds true even when some of the assumptions associated with development of welfare policies in the US have been seriously challenged and revised. The poverty orientation of liberal welfare state systems show up in a strong reliance on economically targeted (ET), asset- and means-tested (AMT) programs following from the double understanding that scarce public resources should go to those who need them the most. A great deal of resources and elaborate systems are developed and devoted to checking those clients, beneficiaries or whatever label is used to define the recipients of welfare provisions, are truly needy. Furthermore, the ancient medieval distinction between the worthy and the unworthy poor are upheld within all social assistance programs, historically and contemporarily, and because social assistance programs dominate vis-à-vis social insurance programs, the AMTs figure prominently within the liberal welfare state regime, including the assessment of whether a claimant is not only needy and without means, but also “worthy” of public help, which usually means that the unfortunate situation is not self-inflicted, for instance because of so-called immoral behavior like excessive alcohol or drug use, having children born out of wedlock, engaging in illicit trades such as prostitution, or the like. 87

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The poverty orientation is still dominant in the US case, a situation it shares with other liberal welfare states. Most clearly, the poverty orientation was asserted in the writings of Frances Fox Piven and Richard Cloward, particularly with their highly acclaimed book Regulating the Poor:The Functions of Public Welfare (1971). Esping-Andersen (1990) contrasted the liberal welfare regime to a “social democratic” one, where entitlements are based on social rights, and a “conservative” one based on merits/achievements. But it should be recalled that welfare regimes are ideal-typical understandings of empirically rather complex combinations of various principles and systems, meaning that regime characteristics will be dominating overall, but when seen from a real-typical perspective, welfare regimes may reveal elements that are based partially on needs, merits and rights.

A brief history of American social policy Welfare policies have developed within the same distinct periods and in the same sequence across Western societies.With modernity indicated by the beginning of industrialization, urbanization and secularization during (the second half of) the 19th century old forms of relief, charity and mutual help were first moderately changed during the period of time up to the Great War. Of lasting legislation is compulsory employers’ accident insurance covering their workers in factories and other larger workplaces, maternity protection, some kind of old-age pension, plus organization of significant private charities, together with the beginning of mutual help organizations among better-off workers. This is also the time when we saw the phasing out of workhouses which had otherwise been one of the preferred ways of dealing with the poor. During the inter-war period state-regulated and state-financed unemployment insurance and social assistance developed, and following World War II the various programs were consolidated into more rights-based entitlements including family policies and – if not the right to, then the expectation of – full employment. Since globalization from the mid-1970s a strong element of activity requirements, such as workfare and active labor market policies, have been added. With minor adjustments and one important exception (health care), the US has followed this periodization and sequencing.

Dealing with the poor during the 19th century The hallmark of help to the poor were the workhouse, outdoor relief and private charities. Following Michael Katz (1996) American welfare has remained “in the shadow of the poorhouse” as his book is titled: poorhouses, which shut the old and the sick away from their friends and relatives, were supposed to deter the working class from asking for poor relief, a deterring and punitive element still found in current social assistance legislation. The poorhouse institution was an import from England. However, in the 19th-century US three to four or more times as many received outdoor relief. As everywhere else during early modernity, poverty was amplified by the development of industrialism, changes in agriculture (mechanization) and in the US case migration. In short, Katz sums up: “the great transformation of social and economic structure disrupted social relations and created a class of highly mobile wage laborers subject to irregular, seasonal, dangerous, unhealthy, often badly paid work. The answer to this fragile social situation was the poorhouse” (Katz, 1986: 9–10). Following Katz: Poorhouses were among a set of social institutions invented or redesigned in early 19th century, all of which embodied similar assumptions and strategies. Together they were a collective response to the great transformation of social experience that both frightened 88

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and exhilarated women and men confronted with the task of raising families, earning a living, and shaping public life at a time when old expectations crumbled, past practice offered few reliable guides, and the future remained unpredictable, even, to a very real extent, unimaginable. So, according to Katz, charity and outdoor relief encouraged idleness and undermined the relation between work and survival. To 19th-century observers, the poor laws interfered with the supply of energy available for productive labor by draining the working class of its incentive. Paupers were living proof that a modestly comfortable existence could be had without hard labor.Their dissipation was a cancer demoralizing the poor and eroding the independence of the working class.Hence from very early on in US social history we find these beliefs and situations which have stayed with her to this day: the poor are poor because they are lazy, and relief is bad because it perpetuates the situation. As already stated, in reality many more received relief than was committed to poorhouses, which is explained by the fact that, despite appalling conditions poorhouses were an expensive way of dealing with the poor. So, the second form of social policy measure being institutionalized in the 19th-century US was that of outdoor relief. The system was administrated locally through so-called overseers or superintendents. An important task of theirs was to decide who was worthy of help and who was not.This distinction between the deserving and the undeserving poor is valid to this day and one of the principles carried over from medieval European organization of regulating the poor. The third element in this early period of US social policy was the important role of private charity. In the early decades of the 19th century, men and women in villages, towns and cities across the country organized associations dedicated to the eradication of vice, crime, ignorance and poverty. Charities utilized the method of friendly visiting; they also made the distinction between worthy and unworthy poor; they were against outdoor relief; and they were mainly “staffed” by well-to-do Protestant women. Everywhere in antebellum America women were the chock troops of charity, as Katz has it. In most towns and cities a Female Charitable Society or Ladies Benevolent Society, dedicated to the relief of widows and run by women, was among the first associations. Women also usually ran the early orphan asylums scattered throughout the country. However, by the Civil War (1861–1865) relations between voluntarism and poverty had been transformed. Their evangelical, feminine tone had been transmuted into a harsher, moralistic, bureaucratic, male proto-professional campaign aimed more at the behavior of the poor than at their souls. But with the Civil War also came veteran’s pensions that over time developed into something close to a national pension regime and during the progressive era policies to protect widowed mothers and their children also developed (Skocpol, 1992), which we shall return to below. Finally, like everywhere else, accident insurance, or workers’ compensation was introduced even if it was not encompassing all states until 1940.

The inter-war time: the Great Depression and the New Deal According to Alice O’Connor (2002: 59), The New Deal represented a significant shift in political and domestic policy in the U.S., its more lasting changes being increased federal government control over the economy and money supply, intervention to control prices and agricultural production. It also marked the beginning of complex social programs and growing power of labor unions. 89

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As is well known, what triggered these changes was the crash of the US stock market which occurred on Thursday, October 24, 1929; then, on “Black Tuesday,” October 29, the stock market fell even more than it had the week before. That led to the worldwide economic depression, and in the US unemployment increased from 4 to 25 percent, with manufacturing output decreasing by almost one-third. Upon accepting the 1932 Democratic nomination for president, Franklin Roosevelt promised “a new deal for the American people.” Roosevelt called on every business establishment in the nation to accept a stopgap “blanket code”: a minimum wage of between 20 and 45 cents per hour, a maximum workweek of 35–45 hours and the abolition of child labor. Johnson and Roosevelt contended that the blanket code would raise consumer purchasing power and increase employment. The National Labor Relations Act, also known as the Wagner Act, revived and strengthened the protections of collective bargaining. The result was a tremendous growth of membership in the labor unions making up the American Federation of Labor. Labor thus became a major component of the New Deal political coalition. Roosevelt nationalized unemployment relief through the Works Progress Administration (WPA). It created hundreds of thousands of low-skilled blue collar jobs for unemployed men (and some for unemployed women and white collar workers). The National Youth Administration (NYA) was the semi-autonomous WPA program for youth. Its Texas director, Lyndon B. Johnson, later used the NYA as a model for some of his Great Society programs in the 1960s, which we shall return to later. Public employment was central to the aims of the US Committee on Economic Security (1935). Begun in the spring of 1935, by 1939 the WPA vaulted the US into the lead among industrialized countries in social spending effort. The WPA stood at the center of the debate over US social policy. Notably, the wages provided by the WPA generated controversy over generosity in social policy. The WPA’s wage policy was designed to provide a reasonable subsistence compatible with “decency and health,” a standard that was amended out of the means-tested programs of the Social Security Act. O’Connor (2002) maintains, like most, if not all, scholars of American social history, that the most important program of 1935, and perhaps the New Deal as a whole, was the Social Security Act, which established a system of universal retirement pensions, unemployment insurance and social assistance (welfare) benefits for poor families and persons with a handicap. It established the framework for the US welfare state system of today.

The post-World War II boom period: the Great Society and the War on Poverty The Great Society was a set of domestic programs proposed or enacted in the US on the initiative of President Lyndon B. Johnson. Two main goals of the Great Society social reforms were the elimination of poverty and racial injustice. New major spending programs that addressed education, medical care, urban problems and transportation were launched during this period. The Great Society in scope and sweep resembled the New Deal domestic agenda of Franklin D. Roosevelt, but differed sharply in types of programs enacted. The most important domestic achievement of the Great Society may have been its success in translating some of the demands of the Civil Rights Movement into law. Four civil rights acts were passed, including three laws in the first 2 years of Johnson’s presidency. The Civil Rights Act of 1964 forbade job discrimination and the segregation of public accommodations. The Voting Rights Act of 1965 assured minority registration and voting. It suspended the use of literacy or other voter-qualification tests that had sometimes served to keep African Americans off voting lists and provided for federal court lawsuits to stop discriminatory poll taxes.The Civil 90

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Rights Act of 1968 banned housing discrimination and extended constitutional protections to Native Americans on reservations. The most ambitious and controversial part of the Great Society was its initiative to end poverty. The Kennedy administration had been contemplating a federal effort against poverty, and Kennedy had been inspired by Michael Harrington’s book The Other America (1962). Johnson, who as a teacher had observed extreme poverty in Texas among Mexican-Americans, launched an “unconditional war on poverty” in the first months of his presidency with the goal of eliminating hunger and deprivation from American life. The centerpiece of the War on Poverty was the Economic Opportunity Act of 1964, which created an Office of Economic Opportunity (OEO) to oversee a variety of community-based antipoverty programs. OEO reflected a fragile consensus among policy makers that the best way to deal with poverty was not simply to raise the incomes of the poor but to help them better themselves through education, job training and community development. Central to its mission was the idea of “community action,” the participation of the poor in framing and administering the programs designed to help them. O’Connor (2002) mentions the following programs resulting from the war on poverty: the Job Corps, whose purpose was to help disadvantaged youth develop marketable skills; Volunteers in Service to America (VISTA), a domestic version of the Peace Corps, which placed concerned citizens with community-based agencies to work towards empowerment of the poor; the Model Cities Program for urban redevelopment; Upward Bound, which assisted poor high school students entering college; legal services for the poor; the Food Stamps program; the Community Action Program, which initiated local Community Action Agencies charged with helping the poor become self-sufficient; and Project Head Start, which offered preschool education for poor children. The OEO was dismantled by President Nixon in 1973, although many of the agency’s programs were transferred to other government agencies (O’Connor, 2002).

The era of globalization: the active turn in social policy After the first oil crisis in 1974 it became obvious to everyone that we live in a globalized world; with this era came a change in welfare state rhetoric. The OECD declared the welfare state in crisis in 1981 and suggested that it was more part of the problem than part of the solution, as hitherto understood. Then followed a long period in which (right-wing) neoliberal ideology became fashionable. Yet, as demonstrated by numerous accounts, the ideological attack on the welfare state did not spill over into retrenchment or reduction of programs, let alone dismantling of the welfare state. By 1997 the Washington-based international organizations gave up the rhetoric. Nevertheless, the era saw some important changes to the overall perspective on welfare and social policies, among them most importantly the general demand that clients of welfare services and provisions be active for instance within work programs assigned to them. Again, the US was no exception. In 1996 during the presidency of Bill Clinton, the AFDC (Aid to Families with Dependent Children), which had its roots back to the New Deal, was substituted by TANF (Temporary Assistance to Needy Families). It forces state governments to require some sort of employment search in exchange for providing funds to individuals and imposes a five-year time limit on cash assistance.The bill restricts welfare from most legal immigrants and increased financial assistance for childcare; and most importantly, it also includes workfare. It was introduced by Clinton as a reform to “end welfare as we know it.” After yet another crisis, the most recent one, dubbed the Great Recession, which started in the US in 2008, the US introduced something bordering a federal, universal health care system, 91

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entitled the Affordable Care Act, so-called “Obamacare.” This happened about one hundred years later than most other modern states when President Barack H. Obama, on the 23rd of March 2010, signed the act. Hence, ending what some have considered the exceptionalism in US welfare policy but still confirming the US as a liberal welfare state in the traditional, philosophical meaning of the term.

US exceptionalism challenged American culture and politics have, occasionally, been labeled “exceptional,” with the preferred reference being to Alexis de Tocqueville’s Democracy in America (1835/1840). It is often summarized in a few elements such as: liberty, egalitarianism, individualism, republicanism, democracy, laissez-faire business, puritan Protestantism, lack of feudalism and the open frontier, which, most relevant in a welfare policy context, would imply a reluctance to create big government interventions. Superficially, it sits nicely with a description of the US welfare state system as being minimal or residual. However, most scholarly literature in this area has gone out of its way to try and convince us that the US is not a welfare state laggard, that it is not particularly small and that it early on established some remarkable federal systems of social policy. The flagship in this regard is Theda Skocpol’s Protecting Soldiers and Mothers: The Political Origins of Social Policy in the United States (1992). Here she demonstrated that what started out as a system of veterans’ pensions over time developed into a de facto all-encompassing old-age pension system. Hence, at the turn of the century some 1 million elder Americans were provided coverage, reaching about one-half of the elder population, native-born men in the North. By the turn of the 20th century, civil war pensions served for many Americans as an analogue to non-contributory old-age pensions, or disability pensions [and the coverage is] in the same range as the coverage of the German and Danish old-age programs . . . [and] the terms of coverage were quite generous compared to European social programs. (Skocpol, 1992: 132) Together with Ann Orloff,Theda Skocpol had already published these results in an article where they showed that the expenditure for the veterans’ program took up between one-fifth and onethird of the federal budget, and they compared it to the total British social budget, which was 21 percent in 1890 and 18 percent in 1900, which made them state that “the American federal government was hardly a ‘welfare laggard’; it was a precocious social spending state” (1984: 729). Skocpol also demonstrated that during the so-called progressive era (1890s to 1920s), the federal government and more than 40 states enacted social spending, labor regulations and health education programs to assist American mothers and children; many of these policies were enacted even before American women were granted the right to vote. Nevertheless, Skocpol recognized elsewhere that a number of features of US social provision require explanation. Core welfare-state policies such as old-age pensions and social insurance were much slower to emerge in the United States than in Europe; and some – such as national health insurance – have never been instituted at all. (1987: 353) Not surprisingly, along the same line of thinking Orloff referred in her overview of the origin of social policies in the US to the belated American welfare state (see Orloff, 1994: 424). 92

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But she also refers to this perspective as superficial and even misleading and then recounts the history of veterans’ pensions. I side with Orloff ’s point that what constrained the social policy reform process was not the usual references to a supposed exceptionalism, but rather what she and Skocpol refer to as “the legacies of state-building as well as the characteristics of the American state structure” (1994: 452), which they demonstrated in great detail in their work on the origin and development of social policy in the US. What they want us to acknowledge is that the American welfare state system is not exceptional, but different.

US social expenditure is the second highest in the world In an article titled “Is the American Welfare State Unusually Small?,” Christopher Howard (2003) sums up the conventional understanding as indicated in the title, and he gives references to some of the most distinguished scholars of American social policy, starting with Harold Wilensky, who in 1965 held that the US is a “reluctant welfare state.” In the following decades many other prominent social scientists came to the same conclusion. Hence, the US has been named “a semi welfare state, a welfare state laggard, an incomplete welfare state,” and so forth. Howard (2003) continued, stating that Contemporary studies of American exceptionalism routinely note the shortcomings of the American welfare state when highlighting the limited reach of American government . . . Introductory textbooks about American government often convey the same message . . . Consensus on this point has become so complete that few people have stopped to question its adequacy. (Howard, 2003: 411) These reflections, statements and assessments are correct when the welfare state is measured by its volume indicated by its share of GDP as has been the preferred indicator at least since Wilensky published his book in the mid-1960s. The latest figures from the OECD (2014) rank the US 23 among 33 member states with a share of total public expenditure to GDP of 19 percent, at par with Estonia, Israel and Poland, and only about 5 percentage points above Chile, Korea, Mexico and Turkey (OECD, 2016). If, however, calculations are based on what the OECD has named total net social spending, which takes into consideration taxation and private welfare expenditure, the US moves from being ranked 23 to be ranked the second biggest spender in 2011 (most recent data) with a spending level of 29 percent, only surpassed by France (33%) (OECD, 2014: 7). This calculation of total net social spending is a relatively new measure discussed in detail in an OECD working paper from 2011 based on 2007 data, which moved the US ranking from 23 out of 27 to third place when public gross expenditure was substituted by total net spending (Adema et al., 2011: 83). Within social policy scholarship it should be unproblematic to consider the effects of tax systems along the lines of Richard Titmuss’s discussion of fiscal welfare (Titmuss, 1987) and taking account of the fact that in some places social benefits are taxed just like other sources of income. As regards adding private welfare expenditure may be considered more controversial, but it is important to note that these do not include individual transfers to individuals, for instance intergenerational transfers. What is meant by private welfare in this respect are expenditures administrated by private collective or societal institutions like insurance companies or other financial institutions. Hence, the measure seems to do a better job capturing the total volume of resources being redistributed within states that we have grown accustomed to calling welfare states. 93

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A somewhat similar or parallel exercise is conducted by Irwin Garfinkel and Timothy Smeeding (2015) in an effort to demonstrate that viewing the US welfare state as unusually small and considering it to always having been a laggard are myths. In line with what was summed up earlier, they wrote: “Most comparative welfare state scholarship of social welfare transfers focuses on only one part of social welfare transfers – public cash transfers. Our work also includes education, near cash benefits, employer-provided health and pension benefits” (Garfinkel and Smeeding, 2015: 4). By including education they can show that far from being a laggard the US has historically been a forerunner, because enrollment in public education has been higher there than anywhere else during the 19th century and most of the 20th century. In sum, the United States went from being one of the world leaders in mass education at the beginning of the twentieth century to being, by mid-century, far and away, the world leader. During the last quarter of the twentieth century, however, the other rich nations substantially closed or eliminated the gap in secondary degree attainment and many other rich nations surged ahead in college enrollment and completion, as well as in early childhood education. (Garfinkel and Smeeding, 2015: 9) Not least in a social investment state perspective, education is most relevant and important as a means of providing welfare to citizens, and historically and everywhere it has been considered (primarily) a state obligation. Regarding the point of including private welfare plans EspingAndersen (2015: 3) is more skeptical, not the least because “the decision to classify private and public welfare plans together runs the risk of ignoring the unique character of the US model, namely its historically entrenched resistance to institutionalize the notion of ‘social citizenship.’ ” He further elaborates on this issue in a more general comment that implicitly also addresses huge parts of welfare state scholarship when stating that the “essence of the welfare state is not captured by spending volumes (however measured), but by the degree to which it consolidates a comprehensive and universal notion of social citizenship” (2015: 3).

Special focus: asset- and means-tested social assistance programs As is to be expected, the US has a considerable number of welfare programs that require people to pass the needs and the means test and sometimes also the work test.What we learned from the section on the historical development of the US welfare state, most programs can either be traced back to the Social Security Act from the mid-1930s or from the late golden age period of the 1960s. We shall describe them in the order of financial importance rather than according to how many recipients they include, but the two are often correlated. In terms of spending they fall into three groups: by far the most expensive program is the health care program Medicaid which costs roughly double of all the other programs combined, with a cost of much more than US$300 billion in fiscal year 2007; EITC which is a tax rebate program, SSI, which is a disability program, Housing Aid and SNAP (food stamps) each cost US$30–50 billion; and finally TANF (social assistance), school food programs, Head Start, which is a childcare program, and WIC, which is an infant food program, each cost between US$5 and 11.5 billion.

Medicaid By far the most expensive program is Medicaid, which provides health care for the poor. In 2007 that amounted to nearly US$327 billion spent on nearly 57 million Americans. That accounts 94

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for nearly US$500 per recipient monthly. The program is not only the most expensive one, but it also reaches the most people. It was introduced in 1965 and has expanded enormously since.1 It covers expenses for inpatient hospital services, outpatient hospital services, prenatal care vaccines for children, physician services, nursing facility services for persons aged 21 or older, family planning services and supplies, rural health clinic services, home health care for persons eligible for skilled-nursing services, laboratory and X-ray services, pediatric and family nurse practitioner services, nurse-midwife services, federally qualified health center (FQHC) services and ambulatory services, and early and periodic screening, diagnostic and treatment (EPSDT) services for children under age 21 (MNT, 2016). States may also provide optional services and receive federal matching funds. The most common of the 34 approved optional Medicaid services are diagnostic services, clinic services, intermediate care facilities for the mentally retarded (ICFs/MR), prescribed drugs and prosthetic devices, optometrist services and eyeglasses, nursing facility services for children under age 21, transportation services, rehabilitation and physical therapy services, and home and communitybased care to certain persons with chronic impairments (MNT, 2016).

Earned Income Tax Credit (EITC) The EITC is a scheme that Richard Titmuss (1955) would have labeled fiscal welfare – that is it is not a money transfer, but it works the same way because it is a tax rebate. But of course, it only applies when people have enough income in the first place to be required to pay taxes. As Titmuss demonstrated in the UK more than 60 years ago, fiscal welfare encompasses enormous resources, and in the current US situation it is the second largest program when it comes to expenditure, nearly US$49 billion, covering nearly 25 million Americans that receive on average US$165 monthly. In 2012 the cost was close to US$55 billion. It was enacted in 1975 and has been expanded a number of times since. It is restricted to families with low or very modest income. According to the Internal Revenue Service, 2015 EITC Income Limits and Maximum Credit Amounts were as follows (see Table 5.1). Investment income must be US$3,400 or less for the year. The maximum amount of credit for tax year 2015 is US$6,242 with three or more qualifying children, US$5,548 with two qualifying children, US$3,359 with one qualifying child and US$503 with no qualifying children.

Supplemental Security Income (SSI) Supplemental Security Income was enacted in 1972, and it provides cash benefits to lowincome blind, disabled and aged persons. It is the third most expensive means-tested program in the US, amounting to more than US$41 billion, benefiting more than 7 million Americans, of

Table 5.1 EITC income limits and maximum credit amounts If filing . . .

Single, Head of Household or Widowed Married Filing Jointly

Qualifying Children Claimed Zero

One

Two

Three or more

$14,820 $20,330

$39,131 $44,651

$44,454 $49,974

$47,747 $53,267

Source: Internal Revenue Service (2016).

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whom 80 percent were disabled, and who received nearly US$500 monthly on average. In 2012 the cost was nearly US$47 billion. According to the Social Security Administration (2015), eligibility depends on income and assets and it varies from state to state. Income is defined as wages, Social Security benefits and pensions. Income also includes such things as food and shelter. Social Security does not consider all income. For example, the following are not counted: the first US$20 a month of most income received; the first US$65 a month earned from working and half the amount over US$65; Supplemental Nutrition Assistance Program (SNAP) benefits, formerly known as food stamps. Resources that count in deciding if eligible for SSI include real estate, bank accounts, cash, stocks and bonds. One may be able to get SSI if one’s resources are worth US$2,000 or less. A couple may be able to get SSI if they have resources worth US$3,000 or less. The income limit for the SSI program is based on the federal benefit rate (FBR). It represents both the SSI income limit and the maximum federal monthly SSI payment. In 2016, the FBR was US$733 per month for individuals and US$1,100 for couples. Most states add money to the federal SSI payment which is called a state supplement, meaning that the allowed income level, as well as the SSI payments, are higher than the federal maximums in those states. Every state except Arizona, Arkansas, Georgia, Mississippi, Oregon, Tennessee, Texas and West Virginia has a state supplement. The amount of the state supplement varies between states, from US$10 to US$400 (DS, 2016a).

Subsidized housing The fourth largest asset- and means-tested program is housing for low-income people. It amounted to more than US$39 billion and reached more than 5 million families who received in average about US$650 per month. Current legislation dates back to the War on Poverty and was enacted in 1965. According to the US Department of Housing and Development (2016) there are two kinds of help to low-income people with regard to housing. Privately owned subsidized housing helps apartment owners offer reduced rents to lowincome tenants, and public housing offers affordable apartments for low-income families, the elderly and persons with disabilities.The former works via the Housing Choice Voucher Program, and it is the federal government’s major program to help very low-income families, the elderly and people with disabilities to afford housing in the private market. Participants are able to find their own housing, including single-family homes, townhouses and apartments. Housing choice vouchers are administered locally by public housing agencies (PHAs). A housing subsidy is paid to the landlord directly by the PHA on behalf of the participating family. The family then pays the difference between the actual rent charged by the landlord and the amount subsidized by the program. Eligibility for a housing voucher is determined by the PHA based on the total annual gross income and family size and is limited to US citizens and specified categories of non-citizens who have eligible immigration status. In general, the family’s income may not exceed 50 percent of the median income for the county or metropolitan area in which the family chooses to live. However, as mentioned by Moffitt (2013: 6), “an important feature of housing programs is that they are not an entitlement and limit recipients to the funds available. The consequence is that waiting lists for subsidies are very long, often requiring years of waiting time.”

Supplemental Nutrition Assistance Program (SNAP) (formerly food stamps) The renewed food stamp program cost more than US$30 billion, reaching more than 26 million families, who in average received a little less than US$100 per month. In 2012 expenditures for 96

The American welfare state system Table 5.2 Eligibility for the Supplemental Nutrition Assistance Program and monthly income (in US$) Household Size

Gross monthly income in US$ (130% of poverty)

Net monthly income in US$ (100% of poverty)

1 2 3 4 5 6 7 8 Each additional member

1,276 1,726 2,177 2,628 3,078 3,529 3,980 4,430 +451

    981 1,328 1,675 2,021 2,368 2,715 3,061 3,408 +347

Source: US Department of Agriculture. Food and Nutrition Service (2016b).

SNAP in current prices had increased to more than US$80 billion.The first food stamp program originated during the Great Depression in 1939; it was later terminated when it was considered that there was no longer a need for it, but it was rejuvenated in 1964 and changed several times. The current program, the Supplemental Nutrition Assistance Program (SNAP), was enacted in 2008 (DAFNS, 2016a). The name was deliberately changed in order to avoid stigma, and it provides eligible lowincome families with a debit card for specified food purchases; the lower the income, the higher the value of the card. Simply put, one is eligible for the new “food stamps” if the net income does not exceed the poverty line plus a 20 percent deduction from earned income; a standard deduction of US$155 for households sizes of one to three people and US$168 for a household size of four, as shown in Table 5.2 (October 1, 2015 through September 30, 2016) (DAFNS, 2016b).

Temporary Assistance to Needy Families (TANF) The TANF program is the result of President Bill Clinton’s welfare reform in 1996. It succeeded the AFDC program (Aid to Families with Dependent Children), which again originated in the Aid to Dependent Children (ADC) program from 1935. It is the quintessential social assistance program in the US. Originally it was intended to support children when one parent was absent (e.g. widows with children or women whose husbands had become disabled). In 1962 it became AFDC, and this was the program Moynihan (1965: 12) referred to when he wrote about “the breakdown of the . . . [African American] family [that] has led to a startling increase in welfare dependency.” AFDC was the program Americans thought of when they talked about being on “welfare.” It became a symbol or an image of single (black or minority) mothers on public support, sometimes derogatively referred to as welfare “queens.” When it was substituted by TANF, Clinton expected it to “end welfare as we know it.” Two major changes stand out: the program was now time-limited, referred to with a baseball metaphor (three strikes and you’re out); and included a work requirement, which aligned it with the international trend of making social policies comply with activation. Moffitt (2014: 18) has called it “the most reactionary bill in the modern history of welfare reform.” Everywhere, social assistance programs are relatively small, and that also applies to TANF that spent US$11.6 billion in 2007, going to 4.1 million families with a monthly expenditure per recipient of US$234. In 2012, the cost was nearly US$14 billion. It is the second smallest social 97

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policy program in the US viewed by the number of recipients and the third smallest with regard to expenditure. Given this minor status, one could wonder why it receives so much attention. Moffitt (2008: 16) suggests it is because First, TANF remains the only general-purpose cash transfer program in the United States and thus most closely fits the public image of “welfare” as well as the policy and academic notion of a negative income tax. Second, reforms in the TANF program have been the most prominent in reflecting US society’s increasing emphasis on work, and it therefore has considerable symbolic value. The US Department of Health and Human Services issues TANF work participation rates, which measures how well states engage families receiving assistance in certain work activities during a fiscal year. A state must meet both an overall (or “all families”) and a two-parent work participation requirement or face a potential financial penalty. The statutory requirements for fiscal year 2013 are 50 percent for all families and 90 percent for two-parent families, but a state’s individual target rates equal the statutory rates minus a credit for reducing its caseload. A state’s caseload reduction credit equals the percentage point decline in its average monthly caseload between the previous year and a base year, fiscal year 2005.The fiscal year 2012 national average work participation rate for two-parent families was 32.9 percent. Seventeen states and one territory failed to meet their work participation requirement for two-parent families (OFA, 2016a). These averages, however, conceal an enormous discrepancy among the states. Participation rates for all families and two-parent families respectively in 2012 were 11.1 and 11.8 percent in Washington State and 79.4 and 77.4 percent in Wyoming (OFA, 2016b).

School food programs Expenditure for school food programs are equivalent to TANF, about US$11 billion, but it reaches more than 41 million children, and the monthly expenditure only amounts to US$22 per child. The National School Lunch Program is a federally assisted meal program operating in public and nonprofit private schools and residential childcare institutions. It provides nutritionally balanced, low-cost or free lunches to children each school day. The program was established under the National School Lunch Act, signed by President Harry Truman in 1946. Children from families with incomes at or below 130 percent of the poverty level are eligible for free meals. Those with incomes between 130 and 185 percent of the poverty level are eligible for reduced-price meals, for which students can be charged no more than 40 cents (DAFNS, 2016c).

Head Start Head Start began as a program for preschoolers in 2007. Three- and four-year-old preschoolers made up over 80 percent of the children served by Head Start in 2014. Early Head Start serves pregnant women, infants and toddlers. Early Head Start programs are available to the family until the child turns 3 years old and is ready to transition into Head Start. It helps families care for their infants and toddlers through early, continuous, intensive and comprehensive services. The programs cost nearly US$7 billion yearly, and it serves 900,000 children with a monthly expenditure of a little more than US$600. Programs can be based in centers, schools or family childcare homes. Early Head Start services are provided for at least 6 hours per day, whereas Head Start preschool services may be half-day or full-day programs. Another option is home-based services, 98

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in which a staff person visits children once a week in their own home and works with the parent as the child’s primary teacher. Children and families who receive home-based services meet twice monthly with other enrolled families for a group learning experience facilitated by Head Start staff. The idea is to try and ensure that children of low-income families are ready for school when they reach school age. The services focus on early learning, screenings and followup for health, development, and behavior, health and safety, social and emotional development, nutrition, family goal-setting, social services, transition services and services for children with disabilities. A minimum of 10 percent of a program’s total enrollment must be children with disabilities (OHS, 2016).

Special Supplemental Nutrition Program for Women, Infants and Children (WIC) The Special Supplemental Nutrition Program for Women, Infants and Children (WIC) provides federal grants to states for supplemental foods, health care referrals and nutrition education for low-income pregnant, breastfeeding and non-breastfeeding postpartum women, and to infants and children up to age five who are found to be at nutritional risk. It was started in 1974. It is the smallest of social programs in the US in terms of cost. In 2007, total expenditure was roughly US$5.5 billion, but it served more than 8 million mothers at a monthly expenditure of a little more than US$50.

Other important welfare state programs Even though the liberal welfare regime is seen as relying predominantly on asset- and meanstested (AMT) programs, the US has five substantial social insurance programs that cost roughly double what is spent on the income-tested programs. They fall into three groups: old-age pensions (OASI) and health care (Medicare) each spend US$400–500 billion; disability pensions (DI) cost around US$100 billion; and accident insurance (workers’ compensation) and unemployment benefits (UI) spend US$35–55 billion. As everywhere, social insurance programs are rights-based entitlements associated with labor market participation.

Old-Age and Survivors Insurance (OASI) In 2007 expenditure for OASI was nearly US$500 billion and it covered nearly 41 million Americans who on average received nearly US$1,000 monthly. It was created by Title II of the Social Security Act of 1935 and is usually referred to as Social Security. It was designed as a “universal contributory social insurance” program to protect workers and their families against loss of income due to retirement or death of the wage earner.To be eligible for Social Security, a person must work in covered employment and pay Federal Insurance Contributions Act (FICA) taxes for at least 10 years. The earliest age at which (reduced) benefits are payable is 62 (Moffitt, 2014: 9). Following Hansan (2011), Social Security has grown and evolved to become the primary source of retirement income for most Americans; 7 out of 10 beneficiaries derive more than half of their income from Social Security benefits. Social Security is also a family protection plan, providing a guaranteed floor of income for spouses and dependent children of wage earners who die or become disabled during their working lives, workers who become disabled, widows age 60 and over, and widows age 50 and over with disabilities. By design, Social Security’s benefit formula is progressive, replacing a higher percentage of pre-retirement income for low-income workers (about 60% of income replaced) than for high-income workers (about 27% replaced). 99

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Medicare Medicare is health insurance for people 65 or older and people under 65 with certain disabilities. It is yet another result of President Johnson’s War on Poverty. It was enacted in 1965. In 2007 expenditure was US$431 billion and it covered more than 50 million Americans at its 40th anniversary in 2015, according to the Social Security Administration. In order to qualify one must have worked for at least 10 years and paid Medicare taxes, or, so it used to be; yet, Moffitt (2014: 14) writes that “Congress has made all individuals 65 or older eligible for it even if they have not worked for 10 years in the Social Security system.” It consists of four elements: Medicare Part A (hospital insurance) helps cover inpatient care in hospitals, skilled nursing facility care, hospice care and home health care. Medicare Part B (medical insurance) helps cover services from doctors and other health care providers, outpatient care, home health care, durable medical equipment and some preventive services. Medicare Part C (Medicare Advantage) includes all benefits and services covered under Part A and Part B and it usually includes Medicare prescription drug coverage (Part D) as part of the plan run by Medicare-approved private insurance companies; it may include extra benefits and services for an extra cost. Medicare Part D (Medicare prescription drug coverage) helps cover the cost of prescription drugs run by Medicare-approved private insurance companies; it may help lower prescription drug costs and help protect against higher costs in the future (CMMS, 2016: 15).

Social Security Disability Insurance (SSDI) Social Security Disability Insurance cost nearly US$100 billion in 2007, covering 9 million Americans, and the monthly expenditure per recipient was US$926. In 2012, expenditure was nearly US$126 billion. According to the Social Security Administration (2016), SSDI pays benefits to people who cannot work because they have a medical condition that is expected to last at least 1 year or result in death. Federal law requires this very strict definition of disability. Certain family members of disabled workers can also receive money from Social Security. To be considered to have a disability by Social Security’s definition, the medical condition must significantly limit the ability to do basic work activities – such as lifting, standing, walking, sitting and remembering – for at least 12 months. Under this program, Social Security beneficiaries can get help with training and other services they need to go to work at no cost to them. Most disability beneficiaries are eligible to participate in the Ticket to Work program and can select an approved provider of their choice who can offer the kind of services they need. After two years recipients are automatically qualified for Medicare. Certain family members may qualify for benefits. They include one’s spouse, if he or she is age 62 or older; one’s spouse at any age, if he or she is caring for one’s child who is younger than age 16 or disabled; an unmarried child, including an adopted child, or, in some cases, a stepchild or grandchild, and the child must be younger than age 18 (or younger than 19 if still in high school); and an unmarried child, age 18 or older, if he or she has a disability that started before age 22. The child’s disability must also meet the definition of disability for adults. In some situations, a divorced spouse may qualify for benefits, if he or she was married to the claimant for at least 10 years, is not currently married and is at least age 62 (SSA, 2016: 12–13). According to disabilitysecrets.com (2016b), the amount of Social Security disability received each month is based on average lifetime earnings before disability began. The Social Security Administration uses a complex weighted formula in order to calculate benefits for each person, up to the maximum monthly benefit of US$2,639 in 2016. 100

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Workers’ compensation Generally, this program is the first one established everywhere, recognizing that in early industrialization working in factories was dangerous business; and still today working in some sectors is very risky. In 2007 expenditures for workers’ compensation (WC) was more than US$55 billion, but data on how many cases this included are not available. The first statewide worker’s compensation law was passed in Maryland in 1902, and the first law covering federal employees was passed in 1906. By 1949, all states had enacted a workers’ compensation program. The workers’ compensation system is administered on a state-by-state basis, with a state governing board overseeing varying public/private combinations of workers’ compensation systems. In the case of Pennsylvania it is stated thus: Workers’ Compensation is mandatory, employer-financed, no-fault insurance which ensures that employees disabled due to a work-related injury or disease will be compensated for lost wages and provides necessary medical treatment to return them to the workforce. The workers’ compensation system provides an “exclusive remedy” to employers and employees and is designed to simultaneously achieve the goals of safer workplaces, prompt compensation and treatment of those it protects and reduced litigation costs to all parties. Employers have two options. An employer may insure its workers’ compensation liability by either purchasing a workers’ compensation policy from the State Workers’ Insurance Fund (SWIF), or through an insurance company. (PDLI, 2016) For federal government workers, the Federal Employees’ Compensation Act (FECA) provides workers’ compensation coverage for employment-related injuries and occupational diseases. Benefits include wage replacement, payment for medical care and where necessary, medical and vocational rehabilitation assistance in returning to work and survivor benefits. When an employee sustains a job-related injury or illness, the department is committed to providing initial medical treatment, referral and follow-up attention under the FECA. This coverage is for all civilian employees of the US. Contract employees, volunteers and loaned employees are covered under some circumstances. The FECA is administered by the Department of Labor’s Office of Workers’ Compensation Programs (OWCP) (DOI, 2016).

Unemployment insurance Unemployment insurance was introduced in the US as part of the Social Security Act in 1935. In 2007 expenditure amounted to nearly US$34 billion, covering nearly 8 million workers, with a monthly expenditure per recipient of US$367. According to the US Department of Labor (2016) the Federal-State Unemployment Insurance Program provides unemployment benefits to eligible workers who are unemployed through no fault of their own. Each state administers a separate unemployment insurance program within guidelines established by federal law. Eligibility for unemployment insurance, benefit amounts and the length of time benefits are available are determined by the state. In the majority of states, benefit funding is based solely on a tax imposed on employers. One must meet the state requirements for wages earned or time worked during an established period of time referred to as a “base period.” In most states, this is usually the first four out of the last five completed calendar quarters prior to the time that the claim is filed. In general, benefits are based on a percentage of an individual’s earnings over a recent 52-week period – up to a state maximum amount (DOL, 2016). The maximum period of time 101

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in which benefits can be received was 26 weeks in 2014 for new claimants in most states. A few states offered a shorter period; the shortest was Florida with 16 weeks. A few states offered more; the most was in Massachusetts with 30 weeks (ETA, 2014).

The Patient Protection and Affordable Care Act (ACA) The Patient Protection and Affordable Care Act (ACA), probably better known as “Obamacare,” was signed into law on March 23, 2010, and marked a watershed in American welfare policy development. If there was something setting the US situation apart from other modern welfare states – liberal or other – and thus warranting the exceptionalism label, it was the absence of a nationwide health care system. When ACA is fully implemented, that situation will probably no longer exist, even if the arrangements may seem peculiar, and even when there is still a long way to go before Americans enjoy universal coverage. Taken together, however, the US still operates a health care system which costs double of comparable European systems that deliver the same quality of services. Hence, at least for a while the US may still be considered exceptional in the case of health care, but less so than before. According to the US Department of Health and Human Services (2016), the law put in place comprehensive health insurance reforms that put consumers back in charge of their health care. The ACA is working to make health care more affordable, accessible and of a higher quality for families, seniors, businesses and taxpayers alike. This includes previously uninsured Americans and Americans who had insurance that did not provide them adequate coverage and security. With regard to coverage it ends pre-existing condition exclusions for children, because health plans can no longer limit or deny benefits to children under 19 due to a pre-existing condition. It keeps young adults covered because everyone under 26 may be covered under their parents’ health plan. It ends arbitrary withdrawals of insurance coverage, because insurers can no longer cancel coverage just because one made an honest mistake. It guarantees the right to appeal, because one now has the right to ask that the health plan reconsiders its denial of payment. Regarding costs, it ends lifetime limits on coverage. It reviews premium increases, because insurance companies must now publicly justify any unreasonable rate hikes. Regarding care, it covers preventive care at no cost. Simultaneously, it protects one’s choice of doctors and it removes insurance company barriers to emergency services. The ACA has substantially increased the coverage of health care in the US; estimates range from 7 to 16.4 million people (Blumenthal et al., 2015: 2451). Glied and Ma (2015) found it to be 11 million, and yet another source stated that the share of Americans without health insurance decreased from 18 percent in 2013 to 13.4 percent in 2014 (Dalen et al., 2015), meaning that the US at time of writing (2016) is some way from universal coverage, but definitely moving in the right direction. Additionally 10.8 million Americans have been able to enroll in Medicaid since the enactment of ACA. Furthermore, groups that have traditionally had the lowest coverage rates – young people, Hispanics, African-Americans and low-income people – have made the greatest gains (Blumenthal et al., 2015: 2451f). It has been projected that the ACA will result in a very modest increase in the demand for health care services, hence the existing supply should be sufficient (Glied and Ma, 2015). Also, the fear that it would be a threat to employer-sponsored health care insurance by creating disincentives has proven not to be the case (Blavin et al., 2015).

Conclusion Returning to the question whether the US welfare state is exceptional or not, it has been argued, as we have seen, that it is a small spender, and that it has failed to introduce programs 102

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introduced elsewhere such as family policies or universal health care. As we have also seen, others maintain that rather than being exceptional, development of welfare policies in the US was belated and somewhat peculiar. Based on the data and discussions presented in this chapter, it is safe to say that the US is not a small spender. Measured in the conventional way, spending 19 percent of GDP on welfare policies may seem modest in an international comparison (the OECD average is 22%), but the figure is roughly the average of what the Anglo-Saxon countries spend; and when private, collective spending is included, the US is the second largest spender among all countries in the world, devoting 29 percent of GDP to social welfare. Furthermore, the relative measure is to some extent misleading, because rich countries do not need to set aside equally big shares compared to less rich countries to achieve the same outcome. So, when social welfare expenditure is calculated as per capita spending, the US spends much more than the OECD average, and more than the other liberal welfare states within the English-speaking group. As regards the trend in social spending over time, the US has behaved exactly like most other states; she has constantly expanded her social budget measured in any way (see OECD, 2016). Since the era of globalization, and contrary to expectations, the US has expanded its social budget by a factor of 3.5, and measured per capita it has expanded 2.5 times. In this respect the US is not exceptional either (for an international comparison see ILO, 2014). Yet, in comparison to Europe, the US – and the other Anglo-Saxon countries – are different.The liberal welfare state redistributes less and, despite the poverty orientation, has more poor people. And with a poverty rate of 18 percent, the US is on the high end compared to the rest of the OECD. This relatively high level of poverty has been remarkably stable; it has not changed during the last 30 years. The biggest programs are not poverty oriented (Medicare and OASI); and even when the poor receive provisions, they are not sufficient to bring them above the poverty line. So the obsession with the poor can most correctly be understood as we learned from Piven and Cloward (1971): “the many programs targeting them are not meant to do away with poverty, but to control and administer the poor.” Finally, inequality has increased in the US from a Gini index of family income distribution of 0.34 in 1985 to 0.40 in 2012 (see OECD, 2016), but increasing inequality is a general trend all over the world, and does not set the US aside. The level, however, is higher than in most of OECD, that is European countries, but lower than in most of the Americas – so whether the US stands out, of course, depends upon the comparison. With respect to what kind of programs the US has or whether it lags, we interpret the development so that indeed family policies have been introduced, but differently to what happened in Europe. The OECD classifies AFDC/TANF as family policy, and that is also how it has been understood – but obviously not for all families, only for the poor. The same can be said about food stamps (SNAP) and WIC, and certainly the Head Start programs focus on families with small children and those using day care. Hence, there is not an absence of family policy in the palette of welfare programs in the US, but they have a profound poverty orientation, unlike the European experience where family policies, generally, are directed towards all families.Thus, the US has maintained her targeting the poor orientation, but has followed general trends in welfare development; yet the introduction of some programs has been belated. As we have seen, welfare programs have come about later in the US than in most other parts of the industrialized world. This certainly also goes for health care with Medicare and Medicaid entering the scene in 1965 and ACA in 2010. 103

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Note 1 Throughout this section and the next figures concerning expenditures, caseloads and monthly expenditures per recipient are of 2007 and derived from Table 1 in Moffitt (2013). For some of the programs we have been able to give expenditure data in current prices as of 2012 from OECD Social Expenditure Data Base (2016).

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ILO, International Labor Organization (2014), World Social Protection Report, International Labor Organization: Geneva, Switzerland. Internal Revenue Service (2016), http://www.irs.gov. Katz, M. B. (1996), In the Shadow of the Poorhouse: A Social History of Welfare in America, Basic: New York. MNT, Medical News Today (2016), Medicaid, http://www.medicalnewstoday.com/newsletter. Moffitt, R. A. (2008), A Primer on U.S. Welfare Reform, Focus,Vol. 26, No. 1, pp. 15–25. ——— (2013), The Great Recession and the Social Safety Net, Annals of the American Academy of Political and Social Science,Vol. 650, No. 1, pp. 143–166. ——— (2014), The Deserving Poor, the Family, and the U.S. Welfare System, Presidential Address to the Population Association of America, Boston, MA, May 2. Moynihan, D. P. (1965), The Negro Family: The Case for National Action, Office of Policy Planning and Research, Department of Labor: Washington, DC. O’Connor, A. (2002), Poverty Knowledge: Social Science, Social Policy and the Poor in Twentieth Century US History, Princeton University Press: Princeton, NJ. OECD (2014), Social Expenditure Update: Social Spending Is Falling in Some Countries, But in Many Others It Remains at Historically High Levels, OECD: Paris. ——— (2016), OECD Social Expenditure Database, http://www.oecd.org. OFA, Office of Family Assistance (2016a), Work Participation Rates: Fiscal Year 2013, http://www.acf.hhs. gov/programs/ofa/resource/wpr2013. ——— (2016b), Work Participation Rates: Fiscal Year 2012, Table 1B, http://www.acf.hhs.gov/sites/default/ files/ofa. OHS, Office of Head Start (2016), Policy and Regulation, http://www.acf.hhs.gov/programs/ohs/policy. Orloff, A. (1994),The Political Origins of America’s Belated Welfare State, in J. Hall (ed.), The State: Critical Concepts, Routledge: London. Orloff, A. and Skocpol, T. (1984), Why Not Equal Protection? Explaining the Politics of Public Social Spending in Britain, 1900–1911, and the United States, 1880s–1920, American Sociological Review, Vol. 49, No. 6, pp. 726–750. PDLI, Pennsylvania Department of Labor and Industry (2016), PA Workers’ Compensation Employer Information, http://www.portal.state.pa.us. Prasad, M. (2016), American Exceptionalism and the Welfare State:The New Revisionist Literature, Annual Review of Political Science,Vol. 19, pp. 187–203. Skocpol, T. (1987), A Society without a “State”? Political Organization, Social Conflict, and Welfare Provision in the United States, Journal of Public Policy,Vol. 7, No. 4, pp. 349–371. ——— (1992), Protecting Soldiers and Mothers: The Political Origins of Social Policy in United States, Harvard University Press: Cambridge, MA. SSA, Social Security Administration (2015), Supplemental Security Income (SSI), SSA Publication No. 05–11000 ICN 480200. ——— (2016), Disability Benefits, https://www.ssa.gov/pubs/EN-05–10029.pdf. Titmuss, R. (1987 [1955]), Social Divisions of Welfare, in B. Abel-Smith and K.Titmuss (eds.), Selected Writings of Richard M.Titmuss:The Philosophy of Welfare, Allen and Unwin: London. Tocqueville, A.D. (1972 [1835/1840]), Democracy in America, volume ii, Knopf: New York.

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6 The Cuban welfare state system With special reference to universalism Carmelo Mesa-Lago

Cuba’s social welfare system is unique in Latin America due to the following characteristics:1 (1) a public health care system that provides universal free services entirely financed by the state (there is no national health insurance); (2) an education system that is also public, universal, free and fully financed by the Treasury; (3) public (social insurance) contributory pensions mainly financed by state enterprises and the government with relatively small contributions from a minority of the insured; and (4) social assistance for vulnerable groups that lack social insurance coverage, also state-financed (there are no conditional cash transfer programs). Unemployment insurance does not exist; the government is promoting non-state employment and it pays a small compensation to unnecessary state employees that are laid off. Other social programs, not discussed herein for lack of space, are universal price subsidies to rationed goods gradually being dismantled, and state building of dwellings, as well as by the people with its own resources. International data show that in 1989 Cuba’s social indicators were ahead of most of Latin America and many East European and Asian socialist countries. The collapse of the USSR and the socialist camp, which provided most trade, oil, aid and price subsidies to Cuba, provoked a grave economic crisis that badly affected social services. A slow, partial recovery followed and helped social welfare, but the 2008–2009 global financial crises led to a new decline. Despite the two crises and an inefficient economic system based on central planning and virtual state ownership of all means of production, social welfare costs kept rising. Due to Fidel Castro’s serious illness in 2006, he transferred power to his brother Raúl who soon began to implement “structural reforms,” endorsed by the 6th Communist Party Congress of 2011. These reforms include a reduction in social expenditures to make them financially sustainable.2 This chapter analyzes the conflict between Cuba’s universal, free, generous and costly social welfare system, and that nation’s economic-fiscal incapacity to sustain it in the long run. For that purpose, the chapter integrates, expands and updates to the end of 2014 several of the author’s previous works on Cuban social welfare (Mesa-Lago, 1994, 2000, 2005, 2012, 2014; Mesa-Lago and Pérez-López, 2005, 2013). Data are largely based on Cuba’s National Office of Statistics and Information (ONEI) and, whenever possible, the chapter compares the situation in 1989, the year before the crisis, with 2013, the most recent year available; it also focuses on the 2006–2014 period under Raúl Castro.

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The evolution of the welfare state system Each of the four key components of Cuban social welfare will be analyzed in four stages of the period 1959–2014: Impressive progress between 1959, upon the triumph of the revolution, and 1989, at the eve of the collapse of the socialist camp. In that year Cuba was ahead of Latin America in almost all social indicators, an achievement made possible by the government commitment to social welfare and the substantial and generous aid of the USSR.3 2 Drastic decline in the worst part of the crisis (1991–1995), after the end of the economic aid and sharp drop in trade with the disappeared socialist camp (“The Special Period in Time of Peace”), combined with previous errors and frequent changes in Cuban economic policies. 3 Improvements in social welfare in the slow, partial recovery that began in 1996, but the huge social gap caused by the 1990s crisis and the world financial crisis of 2008–2009 had strong adverse effects in Cuba that led to a new deterioration. 4 Reforms of the social welfare system (2007–2014) pushed by the severe economicsocial problems accumulated at the time Raúl took power and the rising cost of social expenditures. 1

The universal health care system Before 1959, Cuba had a public health system fairly developed in urban areas combined with a network of health care cooperatives and mutual-aid providers, which explains why the country health indicators were among the best in Latin America. However, rural indicators were significantly inferior, and the country lacked a social insurance health care program, as was common in the region. In 1961, the state expropriated all private health care facilities, cooperatives and mutual-aid societies, and banned the private practice of medicine. A new nationally integrated public health care system with universal and free access was established that substantially reduced the gap in facilities, personnel and quality of services between urban and rural areas; it also built a large number of hospitals particularly in rural areas,4 launched an immunization campaign against contagious diseases, and trained a massive number of physicians and other health care professionals at free public universities and with scholarships including lodging and food for students lacking resources. The public system, however, demands large capital investment because it emphasizes hospitals, equipment and physicians. The family doctor program created in 1984, while providing patients with greater local access to primary care and personalized services, is very costly. The revolution’s health care policy was quite successful during its first three decades. In 1959–1989, the ratio of physicians increased from 9.2 to 33 per 10,000 inhabitants, hospital beds from 4.2 to 5.1 per 1,000 inhabitants, and real expenditures per inhabitant by 162 percent. Infant mortality decreased from 33.4 to 11.1 per 1,000 children born alive, maternal mortality shrank from 125.3 to 29.2 per 100,000 births, and mortality of the population aged 65 and above declined from 52.9 to 46.3 per 1,000 in this age group. Most contagious diseases were eliminated, but the incidence of chicken pox, sexually transmitted diseases (including AIDS) and hepatitis, as well as diarrheic and acute respiratory diseases increased. The crisis almost totally halted imports of medical supplies, spare parts, medicines and chemical inputs previously supplied by the socialist camp. From 1989 to 1993/1995, several health

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indicators deteriorated: maternal mortality increased from 26.1 to 65.2 and elder mortality from 48.4 to 55.7. However, the ratio of physicians jumped from 33 to 51.8, the highest in Latin America, hospital beds augmented from 5.1 to 6 per 1,000, and infant mortality was cut from 11.1 to 9.4, the lowest in the region. These achievements, nevertheless, caused a financial bleeding whereas resources were irrationally allocated: (1) the costly training of physicians continued despite the fact that many abandoned the profession; (2) the number of hospital beds kept rising, but their national occupation average fell from 83.9 to 71.3 percent (56% in pediatric hospitals and 48% in neonatal ones), while the already high national average of hospital stays rose from 9.9 to 10.4 days; and (3) the effort to reduce the quite low infant mortality persisted, investing scarce resources5 that were urgently required to meet more pressing basic needs, such as repairing the severely deteriorated potable water and sewerage infrastructure, and the immunization of the population, which descended dangerously.6 Real expenditures per inhabitant shrank 75 percent between 1989 and 1993. The reduced budget and the drastic decrease in imports generated an acute lack of medicines, spare parts, laboratory-analysis inputs, anesthesia and so forth. The fall in the generation of electricity affected the pumps and water supply, decreased service hours and considerably dwindled water treatment and its potable quality. Most eradicated diseases did not reappear, but those previously showing a growing trend increased notably (hepatitis, sexually transmitted diseases, chicken pox, diarrheic and acute respiratory diseases), while tuberculosis reappeared and rose fast. The lack of prophylactics and the rise in prostitution boosted sexually transmitted diseases, while the reduction in immunization resulted in a swell in chicken pox and tuberculosis. Food shortages expanded malnutrition from 5 to 13 percent of the population, and the lack of vitamins caused a blindness epidemic.The efficacy of family doctors (half of all physicians) declined because they lacked essential medicines and other basic inputs. Members of the armed forces and state security, as well as top government and communist party officials, have a different health service network. In the 1990s, another separate program was created to serve foreigners paying in hard currency. Both programs enjoy higher-quality services than the general health care system available to the population. During the recovery, infant mortality continued its decline to 5.3 in 2006 (the lowest in the hemisphere after Canada), but the maternal mortality peaked at 51.4 in 2005. The ratio of hospital beds per 1,000 inhabitants decreased to 4.1. The ratio of physicians per 10,000 inhabitants almost doubled, from 33.1 in 1989 to 63.6 in 2006 and was at the top in the region and one of the highest in the world (UNDP, 2007). However, of a total of 71,489 physicians, about one-third (24,000) worked abroad, mainly in Venezuela. If these physicians were subtracted from the calculation, the ratio of doctors in 2006 would decrease to 42.2. Furthermore, many physicians in Cuba shifted to other occupations due to the low salaries paid by the state. All this explains the domestic shortage of doctors, the decrease in the population’s access to services and the long waiting list for surgery. The water system is 50–100 years old and, due to leaks, half of the pumped water is lost, thus increasing energy consumption; street leaks create pools where mosquitoes that transmit illnesses are incubated. The hospital infrastructure worsened and there was/is a severe scarcity of medicine, most of which are only accessible through purchase in hardcurrency state shops (TRD). Cuba has eradicated several transmissible diseases such as diphtheria, paratyphoid, poliomyelitis, measles and whooping cough. Out of eight morbidity rates, five notably declined in 1989–2009, especially sexually transmitted diseases, but three increased: food poisoning, tuberculosis and acute respiratory diseases (as well as unreported dengue fever, hemorrhagic conjunctivitis and leptospirosis, which is caused by rodent excrement). And yet, even in those diseases

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The Cuban welfare state system

exhibiting rising rates, Cuba’s figures were still among the lowest in the region. A potential risk is the declining immunization of the population, especially in the triple vaccine and tuberculosis (which could partly explain its increase). Another serious hazard is the huge accumulation of garbage in the streets due to lack of collection trucks. On the other hand, there are 23,000 foreign students on scholarship studying health careers in Cuba, which costs around US$300 million. President Raúl Castro’s structural reforms tried to reduce the cost of health care and to improve its efficiency. In 2006–2013, health expenditures were cut by 2 percentage points of GDP; and the number of hospitals by 37 percent (all rural hospitals were closed, as well as all health posts). Ratios of total health personnel per 10,000 inhabitants shrunk 21 percent, technicians 34 percent and nurses 18 percent. On the other hand, ratios of physicians increased 17 percent but as much as 40,000 are abroad and family-doctor ratios dropped by 60 percent reducing access to primary care in order to get hard currency.7 The ratio of dentists steadily rose. Infant mortality continued its decline and in 2013 was 62 percent below its 1989 level (21% below 2006), whereas maternal mortality rose 33 percent over 1989 (but declined 24% over 2006). The ratio of hospital beds decreased 35 percent in 1989–2013 or 20 percent vis-à-vis 2006 (see Table 6.1). Diseases eradicated did not reappear in 2006–2013, but out of ten infectious diseases, six either rose or were stagnant whereas four decreased (ONEI, 2012, 2014). Efficiency reforms include regionalization of health care, concentrating patients in regional hospitals (thus reducing expenses but increasing travel time for patients) and the use of acupuncture and herbal medicine (the scarcity of medicines remains unabated). And yet there is great need to allocate scarce resources more rationally, e.g. the costly effort to reduce infant mortality continues, but Cuba already has the second lowest infant mortality ratio on the continent; on the other hand, the infrastructure of potable water and sewage is in bad need of repair/reconstruction. Gynecological and pediatric hospitals have a low occupational rate, but their number has decreased very little, whereas there is a significant need for geriatric hospitals due to the rapid aging of the population. Aging and increase in life expectancy provoke rising costs in health care. Table 6.1 Health care indicators in Cuba (1989 and 2006–2013) Indicators

1989

2006

2007

2008

2009 2010 2011 2012 2013

Infant mortalityb 11.1 5.3 5.3 4.7 4.8 4.5 4.9 4.6 4.2 Maternal mortalityc 29.2 51.4f 31.1g 46.5 46.9 43.1 40.6 33.4 38.9 Physiciansd 33.1 63.6 64.0 66.3 66.6 68.5 70.0 73.4 74.6 of which family doctors 29.6 29.0 28.7 30.5 32.4 11.9 12.0 11.9 Dentistsd 6.5h 9.5 9.7 10.0 10.2 10.8 11.3 12.5 13.6 Nursesd 84.0 87.0 95.8 94.7 91.6 85.7 82.5 78.1 Techniciansd 101.6 113.0 123.7 119.0 78.0 67.5 71.1 66.5 Number of hospitals 264 243 222 217 219 215 161 152 152 of which rural 70 38 21 17 17 16 0 0 0 138 No. rural & urban posts 138 120 127 134 0 0 0 5.1 4.1 4.0 3.9 3.7 3.7 3.3 3.3 3.3 Hospital bedse

Changea −62 33 125 −60 109 −18 −34 −42

−35

Notes: Percentage difference in 2013 over 1989 or 2006. Per 1,000 born alive. Per 100,000 births. Per 10,000 inhabitants. e Per 1,000 inhabitants. f 2005. g Underestimated due to the exclusion of “others” category. h 1990. Sources: 1989 from Mesa-Lago (2000); remainder from ONEI (2012, 2014). a

b

c

d

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The universal education system The educational system is totally owned, managed and financed by the government, which also trains, hires and pays all personnel. Educational services are free, and private schools and teaching are banned. In 1959–1989, Cuba constantly progressed in education: illiteracy decreased from 21 to 4 percent,8 and the disparity between urban and rural areas was reduced noticeably (in 1958 illiteracy was 41.7 percent and 11.6 percent, respectively). Primary school enrollment became universal, whereas enrollment in secondary education increased from 20 to 88 percent, and that of post-secondary education from 3 to 23 percent. The crisis of the 1990s harmed education. Between 1989 and 1997, the state education budget was cut 38 percent in real pesos, causing severe scarcity of books, pencils and paper, a cut in investment and maintenance of infrastructure, wear and tear of equipment, reduction in school transportation and food, and widespread deterioration in the quality of services. About the same period, primary school enrollment decreased slightly, but secondary school enrollment fell from 88 to 74.5 percent of the corresponding cohort population, and that of university education from 23 to 12 percent. Secondary school enrollment decline was due to difficulties in transportation, cuts in school meals and diminished importance of diplomas at that level. The halving in university enrollment resulted from obstacles faced by graduates to find jobs in the state sector, which also paid very low salaries. Prior to 1989, university professors and physicians were at the peak of the salary pyramid, whereas teachers earned adequate salaries but, afterwards, small private farmers and transportation providers, self-employed workers and owners of family restaurants jumped to the top of the wage scale. Many professionals abandoned their occupations in search of jobs in enterprises with foreign capital that paid a tiny part of wages in hard currency, in tourism where they received hard currency tips, and in the small private sector or the informal black market where earnings were much higher. Self-employed work authorized in 1993 was banned for university graduates (including teachers) and continues at present. In 2005, the rate of adult literacy was 99.8 percent, primary school enrollment 97 percent and secondary school enrollment 87 percent, the highest in the region, but stagnant or inferior vis-à-vis Cuba’s 1989 levels (UNDP, 2007).9 Higher education enrollment in the 2007/2008 school year leaped 208 percent over the 1989/1990 year, an extraordinary advance largely resulting from Fidel Castro’s launching of the “Battle of Ideas” in 2003. Disaggregated enrollment by discipline showed remarkable differences: humanities and social sciences jumped an amazing 3,943 percent; medicine, economics and physical education around 400 percent; agronomy and technical fields only grew 43 and 38 percent respectively; and natural sciences and mathematics fell 39 percent. Therefore disciplines that significantly contribute to development either declined or had relatively low growth (Table 6.2). Table 6.2 University enrollment in school years in Cuba (1989/1990, 2007/2008 and 2013/2014) Disciplines

Humanities/ social sciences Medicine Education

110

1989/1990

2007/2008

2013/2014

Percentage Change Between 2007/2008– 1989/1990

2013/2014– 2007/2008

2013/2014– 1989/1990

5,095

205,992

33,995

3,943

−83

567

37,305 115,529

187,690 125,095

76,933 22,338

403 8

−59 −82

106 19

The Cuban welfare state system

Disciplines

Economics Physical education Technical sciences Agronomy Natural sciences/ math Art Total a

1989/1990

2007/2008

2013/2014

Percentage Change Between 2007/2008– 1989/1990

2013/2014– 2007/2008

2013/2014– 1989/1990

18,789 14,052

93,162 67,578

17,807 11,044

396 381

−81 −83

−5 −21

29,819

42,741

32,723

43

−23

10

11,606 6,399

16,034 3,922

6,509 4,442

38 −39

−59 13

−44 −30

2,863 241,453

1,765 743,979

1,496 207,237

−38 208

−15 −72

−48 −14

Note: a Disciplines are ranked by the size of enrollment in 2007/2008. Sources: 1989 from Mesa-Lago (2012); remainder from ONEI 2008 to 2014.

In one year, the number of university campuses soared from 17 national ones to 732 mainly located in municipalities, and the number of professors rose 83 percent. Half of the new students were learning from home in socio-cultural fields and social work; others were pensioners enrolled at “popular universities.” The massification of higher education carried the risk that students lacked the needed base, would not work diligently, perform badly or abandon their studies; it also posed important questions: How was it possible to increase the number of university campuses 43 times in 1 year, the number of professors 83 percent and enrollment 56 percent? What type of training did the 44,000 newly hired professors receive? What was the quality of the new programs? Where would the reported 300,000 graduates find productive employment? Instead of the reported 300,000 graduates, only 74,845 finished their studies in 2009/2010. The proportion between the number of graduates and students enrolled by discipline varied: only 5.4 percent in humanities and social sciences (the great majority did not graduate) but 12.6 percent in technical fields and 13.7 percent in natural sciences and math (based on ONEI, 2010). From 17 to 30 percent of students drop out, including more than 21,000 enrolled in pre-university and polytechnic institutes. The experiment of massive and rapid graduation of social workers (included in the humanities and social sciences) failed and enrollment declined 87 percent by 2008 (ONEI, 2008a). Despite the increase in education graduates,10 the Ministry of Education reported in 2008 a deficit of 8,192 teachers in Havana, half of secondary school teachers still were completing their degrees and only 19 percent of primary school teachers had a university degree. The severe shortage was caused by the exodus of teachers largely due to the low salaries paid, and forced a reduction in the years of their training with a program called “emerging teachers” for which 4,500 inexperienced youngsters were brought from the countryside. The serious flaws of this program were acknowledged in 2008, but new programs were launched to quickly train workers and high school graduates as teachers. Out of 150,655 students in municipal university campuses who took exams, 40 percent failed in their last year due to abysmal orthographical errors. Enrollment growth in agronomy was moderate and most graduates shifted occupations, causing a deficit of 3,000 agricultural engineers, which was partly blamed for the fall in agricultural output. 111

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Reforms started in 2008 providing incentives for retired teachers to return to the classroom with the current salary and keeping their pensions; in 2009, teachers and professors got a modest salary raise. Training for teachers in elementary and secondary schools was offered, and they were encouraged to pursue masters and doctoral degrees. Entry quotas and tougher tests were implemented in municipal universities. Several programs created by President Fidel Castro were eliminated: the municipal universities, the social work career, the adult peasant workers schools and pensioners’ courses in “popular universities,” as well as the secondary and pre-university schools in the countryside. Education expenses were cut from 14 to 11 percent of GDP in 2008–2013, and university enrollment by 72 percent, with wide differences among disciplines: 82–83 percent in humanities, social sciences, economics, education and physical education, and 59 percent in medicine and agronomy; on the other hand, technical sciences were cut only 23 percent and natural sciences raised 13 percent. After these wide oscillations, a comparison between 1989/1990 and 2013/2014 shows that university enrollment dropped 14 percent, but with huge increases in humanities and social sciences (567%) as well as in medicine (106%, because of the need to export these professionals); conversely education gained 19 percent and technical sciences 8 percent, but natural sciences and math lost 30 percent, whereas agronomy shrunk 44 percent (Table 6.2). As a result, Cuba’s higher education gross enrollment ratio fell from virtually universal in 2007 to 62 percent in 2012, still the fourth highest in the region after Puerto Rico, Argentina and Chile (UNESCO, 2014).

Social insurance pensions Early in the revolution, the government unified 54 existing social insurance pension programs for old-age, disability and survivors, standardized their entitlement conditions, appropriated their funds and centralized their management. Coverage increased from 63 percent of the labor force in 1958 – one of the highest in the region – to 91 percent, the highest. Small private farmers, the self-employed and unpaid family workers lacked mandatory coverage but could voluntarily affiliate. In 1989, Cuba’s pension system was among the widest in coverage, most generous and costliest in Latin America: (1) retirement ages were very low: 55 and 60 for women and men; (2) the average retirement span was 20 years for men and 26 for women, the longest in the region; (3) workers did not pay contributions and state enterprises paid 12 percent of the salary; and (4) pensions were meager but supplemented by a social protection network – subsidized prices for rationed goods, free health care services, free or low-rent housing and inexpensive public utilities. The armed forces and state security personnel were (are) covered by a separate, more generous pension program than the general system for the rest of the labor force and are basically paid by the state. A man who enters the army at age 17 can retire after 25 years of service, at age 42, and receive a pension equal to 100 percent of his last year salary during an average retirement period of 37 years. In 1995, the cost of armed forces pensions was equal to the total deficit accumulated by the general pension system that covers most of the labor force. The economic crisis of the 1990s undermined the positive features of the pension system. Private sector workers increased from 4 to 15 percent of the labor force in 1989–2001, meaning more people not mandatorily covered. Self-employed workers and small private farmers who voluntarily affiliated had to pay 10 percent of their earnings, a very heavy load (twice of what one-fifth of salaried workers contributed) and a disincentive for affiliation. The tax law of 1994 required private sector workers to pay contributions to the pension system,

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but it was first suspended for socio-political reasons, and later implemented gradually; only salaried workers under the Sistema de Perfeccionamiento Empresarial (Enterprise Improvement System), which operated in 20 percent of all enterprises, paid about 5 percent of their wages as contributions. The monthly minimum pension was 200 pesos in 2008 (US$8), and the average nominal pension was 235 pesos (US$10), hence many pensioners received less. The average pension loss of purchasing power is supported by the following data: (1) the basket of food rations covers only the first 7–10 days of each month and costs 30–40 pesos; (2) the monthly electricity rate is 10–20 pesos; (3) bus fares are 12–20 pesos (one taxi ride costs 10–20 pesos); (4) telephone and water rates range from 8 to 10 pesos; (5) 85 percent of the population own their own dwelling, but the rest pay an average rent of 33 pesos; (6) these costs add up to 60–123 pesos. With the remaining income (112–175 pesos), pensioners must purchases food in free agricultural markets and TRD to meet the food needs for the 20–23 days of the month not met by rationing, and buy certain foodstuffs and products not included in the ration cards. One pound of ham is tantamount to the minimum pension, and an energy-saving light bulb purchased in a TRD is half of the minimum pension (Mesa-Lago, 2006, updated with prices of 2008). Furthermore, the previous social protection network deteriorated due to the reduction of access to and quality of health care services, transportation problems and the decrease in goods available through rationing that covers only 7–10 days of the month. As a result, it is impossible for pensioners who collect the minimum pension – or even the average pension – to survive if they do not receive foreign remittances, family help or additional income from work. Many pensioners sell things on the streets or carry out other activities to survive; to collect their monthly pension they must stay in line for hours in the banks. One poll in the city of Havana in 2000 indicated that the elder population is among the poorest group: 88 percent lived in mediocre or bad housing; 78 percent considered their income insufficient to meet basic living expenses, and they complained about expensive transportation, the need to receive priority in health care and lack of asylum facilities (Espina, 2008; ONEI, 2008b, 2009c). As the population ages and the pension program matures, the ratio of contributing insured workers for one pensioner falls, hence forcing a gradual increase in contributions and retirement ages, a trimming of pensions – extremely low in Cuba – or a combination of these measures. Currently Cuba is, after Uruguay, the country with the most aged population in Latin America: its birth rate decreased from 2.5 to 1 percent in 1953–2009 (the fertility rate has been below the replacement rate since 1978 and is the lowest in the continent), its emigration rate rose from −0.06 to −0.33 percent, the average population age rose from 27 to 44 years, and its population growth rate contracted from 2 to −0.01 percent (in absolute terms, the population decreased in 2006–2008).The cohort age 60 and above augmented from 7 to 17.4 percent of the total population.The aging of the population aggravates the financial non-sustainability of social insurance pensions (ONEI, 2008b, 2009b, 2009c; Mesa-Lago, 2012). Due to generous entitlement conditions, maturity of the pension system, aging of the population and insufficient financing, pension costs rose from 5.8 to 7.6 percent of GDP in 1989–2009 causing an escalation in the fiscal deficit from 38.2 to 41.5 percent of total pension expenditures. The ratio of active workers per pensioner fell from 3.6 to 3.1 in that period and it is projected to further decline to 1.7 in 2025 (Table 6.3). The reform of 2008, confronted many but not all of the problems afflicting the pension system: (1) increased the retirement age by five years for both sexes (from 55 to 60 for women,

113

Carmelo Mesa-Lago Table 6.3 Pensions financial imbalance, pension real value and population aging in Cuba (1989 and 2008–2013) Indicators Pension cost (percent GDP) Pension deficit Financed by state (percent expenses) percent of GDP Employer contribution Current percent of payroll percent needed to eliminate deficit No. of active workers per pensioner percent of population age 60 and over Real average pension (1989 = 100)

1989

2008

2009

2010

2011

2012

2013

5.8

7.1

7.6

7.6

7.4

7.3

7.2

38.2 2.2

40.5 2.9

41.5 3.2

39.1 3.0

41.0 3.0

43.1 3.1

43.8 3.2

10.0 16.2 3.6 10.9a 100.0

12.0 20.2 3.1 17.0 48.2c

12.0 20.5 3.1

12.0 19.7 3.0 17.8 49.6

12.0 20.3 3.0

12.0 21.0 2.9 18.3 50.0

12.0 21.3 2.9 18.7b 50.3

49.4

50.2

Notes: a 1981. b 26 percent is projected for 2025. c The lowest value was 16.1 in 1993. Sources: 1989 from Mesa-Lago (2012); remainder author’s estimates based on ONEI (2007 to 2014).

from 60 to 65 for men), gradually, in a period of 7 years11 (those who retire during this period with ages less than 60 or 65 will receive lower pensions); (2) calculated the pension based on the monthly average of five years of salary and applied to this average a replacement rate of 60 percent (instead of the previous 50%), and stepped up the number of required work years from 25 to 30; (3) raised the pension amount for each year that retirement is postponed; (4) increased nominal pensions, the minimum by 22 percent and others from 10 to 20 percent (the higher the pension amount, the lower the increase); and (5) imposed a wage contribution of 5 percent to workers, but gradually as their salaries are raised. Despite the reform, the pension deficit financed by the state continued to climb in 2008–2013 from 40.5 to 43.8 percent of total expenses and from 2.9 to 3.2 percent of GDP (Table 6.3).The gradual increase in age to 60/65 (women/men) will not be completed until 2015 and full effects will take longer.The population age 60 and above rose to 18.7 percent in 2013 and should reach 26 percent in 2025 (one elder person for every four inhabitants), when Cuba will have the oldest population on the continent. As the population declines in absolute numbers, the productive age segment contracts, making it more difficult to finance pensions: the ratio of active workers to pensioners fell from 3.6 in 1989 to 2.9 in 2013.The worker contribution of 5 percent should be gradually imposed in tandem with salary increases but the real wage shrunk by 72 percent in 1989–2013. Furthermore, even if the entire labor force had paid the 5 percent contribution in 2013, the total contribution (combined with 12 percent from enterprises) would have been 17 percent, vis-à-vis an estimated 21 percent required to financially balance the system in that year, and even more so in the long run. The non-state sector (self-employed, cooperative members and wage earners) rose from 17 percent of the labor force in 2008 to 26 percent in 2013, which could jeopardize coverage by the pension system, but rules enacted in 2013–2014 made coverage mandatory to part of the self-employed and members of new cooperatives, hence approaching full coverage of the labor force. Cuba is one of four countries in Latin America whose law does not mandate a yearly adjustment of pensions to the cost of living. Despite nominal increases in 2005 and 2013, the average pension annually adjusted to inflation in 2013 was 50 percent below the 1989 level and grossly insufficient to satisfy basic needs; it has been virtually stagnant in the last 5 years (Figure 6.1).

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120 98.2

Index 1989 = 100

100 80 60

50.3

40 20

26.7 16.1

0 9

198

1

199

3

199

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199

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199

9

199

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200

3

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5

200

7

200

9

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1

201

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201

Figure 6.1 Evolution of the real pension in Cuba (1989–2013) Sources: Mesa-Lago (2014), ONEI (2014).

Social assistance Early in the revolution, social assistance protected various vulnerable groups: elderly people, the disabled, single mothers, parents dependent on workers deceased, pensioners with low benefits and workers without the right to a pension. Poor renters are exempted from paying more than 10 percent of their salaries. The government has never published poverty statistics and, until the crisis, claimed that it had been eradicated. Nevertheless, an academic study estimated that due to the crisis, the urban population “at risk of having a basic need uncovered” (a euphemism for poverty) rose from 6.3 to 14.7 percent in 1988–1996. The population “at risk” in Havana increased 233 percent in 1988–2002, from 6 to 20 percent; a poll of self-perception of poverty showed 23 percent of the population considered itself “poor” and another 23 percent “almost poor” (Añé, 2007). The poor population was mostly integrated by women, the elder population, Afro-Cubans, migrants from eastern provinces, those having only a primary school education or living in homes with six or more people, and the unemployed (Espina, 2008). Despite the increase in poverty, the average social assistance real pension decreased 82 percent in 1989–1994 – the worst stage of the crisis. The nominal monthly average social assistance pension in 2000 was only 105 pesos (US$4.20), not enough to purchase 1–2 days of food in non-rationed markets. Consequently, in 2000–2006 the number of social assistance beneficiaries jumped 207 percent, while as a percentage of the total population they grew from 1.8 to 5.3 percent. Social assistance expenditures stagnated at 0.5 percent of GDP in 1989–2000, but gradually increased to 2.2 percent in 2006. The economic reforms are rational but have expanded poverty for various reasons: extraction of subsidized goods from the rationing booklet and sold at market prices three to four times higher than rationed prices; cuts in social services, such as health care; elimination of subsidized

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meals in workers cafeterias (workers now receive a voucher insufficient to buy lunch); increase in prices of public utilities and merchandise sold at TRD with a markup of 230 percent; and a rising rate of open unemployment from 1.6 to 3.3 percent (ONEI, 2008a). Cuban economists argued since 1995 that instead of providing universal subsidies to goods (rationing), including those in the high-income group, subsidies (assistance) should be granted to those in need. Raúl Castro followed that advice in 2008 and promised that nobody in need would be left unprotected. But in 2011, the Party Congress approved a resolution ending social assistance to beneficiaries with families capable of helping them; detecting and eliminating free riders is a common policy but in the Cuban context of expanding poverty and generalized level of need such resolution is not reasonable. As a result, a drastic reversal in social assistance occurred in 2006–2013: total beneficiaries shrunk 71.5 percent and related to the population decreased from 5.3 to 1.5 percent whereas the number of poor expanded, hence most of the needy lack social assistance (Figure 6.2). In the same period, the social-assistance budgetary allocation (the smallest among all social services) dropped from 2.2 to 1.5 percent of GDP. The monthly average social assistance benefit was 154 pesos in 2013 or US$6.16, an increase of US$1.96 over 13 years and 41 percent less than the average social insurance pension; therefore it does not cover basic food needs. In addition, the following cuts were implemented in 2006–2013: 21 percent on social assistance hospital beds for the elder population and the disabled; 21 percent on homes for the old;12 and 63 percent on assistance for the elder population in need (Figure 6.2; ONEI, 2007–2014).

6 5.3 5

4

3 2.2 2 1.5 1 0.3

0 2006

2007

2008

2009

Expenses as % of GDP

2010

2011

116

2013

Beneficiaries as % of population

Figure 6.2 Decline of social assistance in Cuba (2006–2012) Sources: ONEI (2007 to 2014).

2012

The Cuban welfare state system

The cost of social welfare and its financial unsustainability In 2006–2008, the cost of social welfare rose to 55.4 percent of total state budget current expenditures and 36.6 percent of GDP, both the highest in Latin America. Such outcome was due to the financial commitment of the revolution to expand social protection of the population, which in turn became a source of support. But such costs proved to be financially unsustainable in the long run, aggravated by the collapse of the socialist camp and the world financial crisis and despite substantial Venezuelan aid since 2003. President Raúl Castro therefore was forced in 2007–2013 to cut social welfare costs by about 2 percentage points: to 51 percent of state budget and 27 percent of GDP (Figure 6.3). Measuring the quality of social welfare services is a difficult task, but abundant evidence indicates deterioration, at least in the last 10 years and probably since 1989. The Cuban economy lacks the capacity to sustain the high cost of social welfare. The GDP growth rate slowdown from 12.1 to 1.3 percent in 2006–201413 (an annual average of 2% in the last 6 years), systematically below official targets and among the lowest in the region. Gross fixed capital formation fell from 10.4 to 8.3 percent of GDP in 2006–2013 (compared with 25.6% in 1989 and a regional average of 20% in 2014); Cuban economists estimate that 25 percent is needed to sustain economic growth. The agricultural production index in 2013 was below the 2005 level, except in three crops, and the industrial production index declined 45.4 percent in 1989–2013. In 2006–2013, the trade balance of goods ended in deficit peaking at US$10.6 billion in 2008; after a brief decline it resumed its growth and reached US$9.4 billion in 2013, the second largest in history (ECLAC, 2014; ONEI, 2014). Food imports cover 70 percent of domestic consumption and augmented from US$1.5 billion to US$2 billion in the last 3 years.

60 53.4

55.4 48.2

% of social expenditures

50 40 30

51.1

36.6 29.6

28.9

27.3

20 10 0

2006

2007

2008

2009

2010

Percentage of State Budget

2011

2012

2013

Percentage of GDP

Figure 6.3 The cost of social welfare in Cuba (2006–2013)a Note: a Social welfare includes health care, education, social insurance pensions, housing and social assistance. Sources: ONEI (2007 to 2014).

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Conversely, Cuba enjoys a surplus in its balance of services, mostly generated by the export of medical services mainly to Venezuela; such surplus often offsets the deficit in the balance of goods but leads to a strong economic dependence on Venezuela. The author estimated the combined value of the entire economic relationship with Venezuela at US$13 billion in 2010, tantamount to 21 percent of Cuban GDP (Mesa-Lago and Pérez-López, 2013). The risk of this dependence increases with the severe economic crisis of Venezuela. At the time of writing this chapter, Presidents Obama and Castro announced an agreement to gradually normalize relations between the two countries; it is too soon to assess how this crucial event will affect the Cuban economy and social welfare.

Conclusions and changes to improve social welfare and its sustainability Cuba’s economic system and current financial capacity cannot sustain its costly social welfare system over the long term and demand structural reforms, which President Raúl Castro has been implementing since 2007, such as reducing all social expenditures. The explained social welfare changes upon ILO social security principles (see Mesa-Lago, 2008) are summarized herein as well as policy suggestions to improve the situation.

Impact on social security principles System unity and uniform treatment The social welfare system is unified and entitlement conditions are uniform with the exception of the armed forces and security personnel health and pension schemes that have better conditions and more generous and costly benefits that should be integrated to the general system.

Coverage and access There is universal coverage in health care, elementary and secondary education, as well as high coverage in tertiary education, whereas pension coverage is quasi-universal, placing Cuba ahead of most of Latin America. Conversely, social assistance is minimal and being sharply cut despite an expanding vulnerable population. Health care and education are free and only a minority of workers pays pension contributions. On the other hand, effective access to health care has decreased due to the exportation of medical personnel to earn hard currency (the number of primary care family doctors has been halved), deterioration of services and severe scarcity of medicine and other inputs. Access to tertiary education that was virtually universal in 2007 had shrunk by 72 percent in 2014.

Benefit sufficiency The average monthly pension in 2013 was equivalent to US$20 in 2013, grossly insufficient to cover basic food needs; the average real pension dwindled by one-half in 1989–2013. The social assistance average monthly benefit was equivalent to US$6 in 2013, 41 percent less than the average pension and hence even more inadequate to cover food needs. Pensioners and social assistance beneficiaries are among the poorest groups in the population and survive due to foreign remittances, working and receiving help from relatives. Cuba has one of the better educated populations and labor forces in the region, but the quality of education has deteriorated, albeit some positive reforms are being introduced. 118

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Social solidarity Contrary to Latin America, no social service has been privatized in Cuba, and being public- and state-financed, social solidarity is maximized, with transfers among generations, genders and income groups (save for the armed forces).

Administration Social services are excessively centralized in a state monopoly, without effective people’s participation in their management, monitoring and evaluation, hence requiring decentralization and social participation. The ILO-recommended tripartite approach is lacking, as workers do not have any participation in the management of the public pension and health systems. Administrative costs are impossible to estimate as they are not transparent and the government does not provide the needed data.

Financial sustainability The universal and largely free social welfare system is financially unsustainable in the long run. The reforms have reduced such costs by 3 percentage points of the budget and 9 points of GDP, but still they remain the highest in the region, and yet, access and quality have deteriorated. Despite the pension system tightening, the deficit financed by the state has grown; pension and health care costs will keep increasing due to population aging.

Suggested policy recommendations to improve social welfare Health care The public health care system should be maintained but with changes: give priority to potable water and sewage infrastructure; reallocate resources from continued reduction in infant mortality (a problem solved many years ago) towards said infrastructure, medicine imports and other areas of greater need; discontinue higher education scholarships as well as health care aid to other countries unless they pay the cost of such services; convert maternity and pediatric hospitals with low occupancy rates into geriatric hospitals and old-age homes; charge the full cost for private rooms to the highest income strata of the population; attract more foreigners to receive medical attention in Cuba; authorize self-employment of health professionals as well as health care cooperatives that compete with state services.

Education Preserve the public education system with modifications: shift part of elementary school resources (taking into account the fall in fertility and the population in primary school age) to pay better salaries to teachers; place more emphasis on the higher education disciplines geared towards development, like business administration, as well as vocational education; continue the reduction of excessive enrollment in marginal disciplines through stricter admission standards; increase the ratio of graduates per enrolled students; authorize self-employment of teachers and professors; eliminate the existing obstacles to the entrance of foreign scholars and researchers (in reciprocity for President Barack Obama’s relaxation of US-Cuban relations). 119

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Pensions Reform the system with the following measures: conduct an actuarial study to determine what is the pension disequilibrium; establish salary contributions for all non-state businesses with a minimum number of employees, incorporating them into the social security system; charge selfemployed workers the 5 percent that salaried workers are gradually paying; integrate into the general pension system the costly armed forces and internal security pension schemes; close the current general pension system to new entrants, make the state responsible for ongoing pensions, and create a new public system for young workers already insured in the old system as well as new workers, with a reserve that is invested to generate capital returns and help in the long-term financing and improvement of pensions; raise pension levels and adjust them to the cost of living.

Social assistance Substantial changes are needed: gradually reduce the rationing system and target social assistance to the poor and vulnerable groups of the population with the goal of creating a wide social safety net to protect all those in need; permit churches to receive direct foreign aid in order to establish and expand free asylums for old-age people in need. Cuba’s social welfare system is unique in the region due to its universal and free features but has become financially unsustainable; current reforms are painfully cutting away many services and gratuities, but the only way to solve the problem is to transform the economic system in a way that it generates high and sustainable growth able to finance an adequate social welfare system.

Notes 1 Latin American countries usually have social insurance for pensions, health care and employment injury; most of them also have a public health system geared to the uninsured population, and some have unemployment insurance; very few have family allowances (Mesa-Lago, 2008). 2 Other reforms are: “update” the inefficient economic model, increase agricultural output, reduce unneeded state employment with those laid off to find jobs in an expanding non-state sector, attract foreign investment and unify the dual currency. 3 In 1960–1990, the USSR granted US$65 billion to Cuba, 60.5 percent of which was in donations and non-repayable price subsidies and 39.5 percent in loans, of which Cuba paid back only US$500 million. 4 In 1959–1989, the number of rural hospitals rose from 1 to 70, while the total number of hospitals increased from 230 to 264. 5 As infant mortality declines, the effort to further decrease is more difficult and costly, requiring sonograms to detect congenital problems, the special care and feeding of pregnant women, and performance of abortion when the fetus presents serious risks. Cuba has the highest abortion rate in the region, explaining in part the contradiction between the fall in infant mortality and the increase in maternal mortality. 6 In 1989–1995, the percentage of the immunized population decreased 56 percent for tuberculosis, 50 percent for tetanus, 45 percent for typhoid and 27 percent for poliomyelitis. 7 After a cut in the number of students in schools of medicine, a sharp increase occurred since 2010. Selling of professional services (mainly health care personnel) generated about US$5 billion in 2010 (Mesa-Lago, 2012). 8 The government alleged that the 1961 literacy campaign cut illiteracy to 3.9 percent, but the 1970 census showed that it was 12.9 percent; even so, it was a substantial reduction from the 23.6 percent illiteracy rate recorded in the 1953 census, the latest taken before the revolution. 9 UNESCO (2008) gave for 2006 a rate of 97 percent for primary school and 87 percent for secondary school. 10 Before the explosion in enrollment in 2003, the 2002 census reported that there were 195,988 graduates in education. Many young people enroll to avoid or cut the number of years of compulsory military service. 120

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11 The author recommended a period from 10 to 20 years for the gradual increase in the retirement age, but Raúl Castro (2008) stated that the pension financing crisis required it to be done in just 7 years. 12 Only 15,825 slots are available in asylums and nurseries, but 480,000 age 60 and above need care. 13 ECLAC (2014) estimates 1.1 percent, the fifth lowest rate among 35 countries of Latin America and the Caribbean.

References Añé, L. (2007), Contribución a los Estudios de Pobreza en Cuba, Congreso de LASA, Montreal, Canada, September 6–8. Castro, R. (2008), Discurso en las Conclusiones de la Primera Sesión Ordinaria de la Asamblea Nacional del Poder Popular, Havana, July 11, p.1. ECLAC, Economic Commission for Latin American and the Caribbean (2008–2014), Preliminary Overview of the Economies of Latin American and the Caribbean 2008 to 2014, Santiago de Chile. ——— (2013a), Panorama Social de América Latina 2013, ECLAC: Santiago de Chile. ——— (2013b), Cuba, Estudio Económico de América Latina y el Caribe 2013, ECLAC: Santiago de Chile. Espina, M. (2008), Políticas de Atención a la Pobreza y la Desigualdad: Examinando el Rol del Estado en la Experiencia Cubana, CLACSO, Buenos Aires. Mesa-Lago, C. (1994), Breve Historia Económica de la Cuba Socialista: Políticas, Resultados y Perspectivas, Alianza Editorial: Madrid. ——— (2000), Market, Socialist and Mixed Economies: Comparative Policy and Performance – Chile, Cuba and Costa Rica, Johns Hopkins University Press, Baltimore, MD. ——— (2005), Social and Economic Problems in Cuba During the Crisis and Subsequent Recovery, CEPAL Review, No. 86, pp. 177–199. ——— (2006), The End of Half a Century of Rationing in Cuba? Hemisphere,Vol. 17, pp. 30–34. ——— (2008), Reassembling Social Security: A Survey of Pension and Health Care Reforms, Oxford University Press: Oxford. ——— (2012), Cuba en la Era de Raúl Castro: Reformas Económico-Sociales y sus Efectos, Editorial Colibrí, Madrid. ——— (2014), Institutional Changes in Cuba’s Economic and Social Reforms, in Richard Feinberg (ed.), Cuba Economic Change in Comparative Perspective, Brookings Institution, Washington, DC. Mesa-Lago, C. and Pérez-López, J. (2005), Cuba’s Aborted Reform, University of Florida Press: Gainesville. ——— (2013), Cuba Under Raúl Castro: Assessing the Reforms, Lynne Rienner: Boulder, CO. ONEI, Oficina Nacional de Estadísticas e Información (2008a), Anuario Estadístico de Cuba 2007, Havana. ——— (2008b), El Estado Actual y Perspectivo de la Población Cubana: Un Reto para el Desarrollo Territorial Sostenible, Havana. ——— (2009a, 2010, 2011, 2012, 2013, 2014), Anuario Estadístico de Cuba 2008, 2009, 2010, 2011, 2012, 2013, Havana. ——— (2009b), Anuario Demográfico de Cuba 2008, Havana. ——— (2009c), El Envejecimiento de la Población Cubana 2008, Havana. UNDP (2007), Human Development Report 2007/2008, UNDP: New York. UNESCO (2008), Statistics, http://www.stats.uis.unesco.org/unesco/Tableviewer. ——— (2014), Institute of Statistics, Higher Education, data.uls.unesco.org.

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7 The Mexican welfare state system With special reference to conditional cash transfer systems Gabriel Martínez

Social policy in Mexico over the last two decades has focused on supporting populations in extreme poverty, stabilizing social security and widening access to health services. These issues have grown in importance in the public agenda over the last 25 years, and the Peña Nieto administration (2012–2018) has defined universal social security as a touchstone of its policy.Today, the Mexican welfare state is in a formative stage. Large swaths of the population have limited access to comprehensive health care, a minority of the elder population is eligible to receive a social security pension, and family support and employment programs reach only a small portion of the labor force and families. The current drive, however, is not the first attempt to “universalize” social benefits. Our aim in this chapter is to understand how the current conditions have been reached and to identify spaces for innovation that could support Mexico’s successful evolution towards an environment of respect for human rights and sustained welfare improvements. Mexico is a young country that is still experiencing substantial demographic growth, and it is also a country with sharp social divisions. Data from Instituto Nacional de Estadistica, Geografia e Informatica (INEGI, 2014) point out that in 2012, 2,498 million births were registered, and the fertility rate was measured at 2.39 children per woman. Only 602,000 deaths were registered the same year. In 2010, there were 28.1 million households in the country, and the labor force was made up of 52 million individuals in the second quarter of 2014.This is not a poor country on average, but most Mexicans are poor. Indicators from the World Bank show that GDP per capita in 2012 was US$10,307, but the headcount of those living at or below the national poverty line was 52.3 percent in 2012, 63.6 percent in rural areas and 45.5 percent in urban areas. Child employment rates (for children 14–17 years of age) in 2011 were 4.4 and 9.1 percent for females and males, respectively. The prevalence of malnutrition stood in 2011 at 13 percent for children ages 5 or less (12 percent for females, 15 percent for males) (WB, 2014). In the first part of the main section of this chapter, we will discuss the major characteristics of social protection institutions and agencies in Mexico.Thereafter, we address the topic of conditioned cash transfers (CCTs) and, in particular, the Progresa/Oportunidades/Prospera program, which is a topic of special focus for this country.Then, we discuss the main trends of the welfare state system in Mexico. Last we present conclusions. 122

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Major characteristics of the Mexican welfare state system The welfare state in Mexico is highly segmented between agencies and programs. On the one hand, some groups serve low-income populations of those who are more often indigenous and rural dwellers; on the other hand, social security itself serves the more urban and relatively betteroff families. Although the country is a federation and has undergone major transformations since the 1990s (Mexico entered a process of economic reform approximately two and a half decades ago, its move towards free trade began around 1986–1987 and the NAFTA agreement began operations in 1994), the system is centralized in its design and regulations, even though social policy has undergone concurrent major transformations. Indeed, reflecting the reality of a country with large inequities across the population, the Mexican welfare state system is a divided set of institutions. Health insurance, pension benefits and childcare programs are provided under segmented options and the mobility of families across them is limited. Given the sharp social segregation of the country, we explain briefly the main reforms in programs geared towards low-income families and in programs for the rest of the population. Programs aimed to reduce poverty in Mexico were successfully transformed during the 1990s. Then, a policy based upon the delivery of in-kind benefits by state-owned corporations was replaced with a conditional cash transfer design. These new programs provide cash to families to support consumption under a structure of incentives meant to induce health and education. It is believed that for low-income populations, a lack of adequate nutrition, health and education generates a vicious cycle of poverty. Thus, the new design of anti-poverty programs aimed to produce external effects that would also lower the cost of human capital investment in poor families. The program Prospera (originally named Progresa, and later Oportunidades before becoming Prospera in 2014) has been the standard-bearer of that strategy. Evaluations measuring the effect of the program on individual and family welfare are, in general, favorable. However, results in terms of reducing the sharp social divide are modest. In addition to large federal programs like Prospera, a cloud of federal, social and municipal social programs has been meant to ameliorate the effects of poverty. Name changes to these programs are related to changes of the party in government, but the structure of the national program has not changed with these changes in name. Agency by agency and program by program, social security has been reformed in a haphazard fashion. No general plan or regime has been devised to link different social security health and pension funds. Reforms to social security have concentrated on pension programs and have provided operational and financial stability to pension funds. However, social security coverage has been stagnant at around half of the population for more than two decades, and reform of Mexico’s social health insurance system has not been a significant agenda item. Although the risk of the kinds of inflation and currency crises that devastated the social programs between the 1970s and 1990s has decreased, it is clear that the economic cycle, as the Great Recession of 2007 continues (in 2014), plays an important role in low employment and slow wage growth, which have a strong effect on individual well-being. In the absence of a general social security scheme that allows citizens to integrate activities and benefits from a diversity of programs, it is unlikely that significant gains in universal social security will be achieved. Thus, Mexican social policies, programs and agencies are segmented into two sets of institutions and programs. Each set serves a population with distinct social and economic characteristics. Social security covers roughly one half of the population, but this half is comprised of urban, salaried, higher-income families. Other families are served by programs that are, in general, disconnected and often remedial in nature. For brevity, we will name this second set of 123

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programs “non-contributory programs,” because eligibility for them is not linked to payment of contributions. Mobility across the two sets of social programs is not uncommon, yet there is a core of very poor families that rarely moves across groups, even over the span of generations. Families in that core of poverty are often indigenous, rural and dwell in the south. A 2006 survey on social mobility found that 59 percent of families in the upper quintile of the income distribution came from wealthy families, and that 85 percent came from the two top quintiles of the income distribution. Nearly half of the families at the bottom of the income distribution came from families that were also at the bottom (Serrano Espinosa, 2008). The uneven distribution of income and of opportunities for progress in the country reflects upon the design of the social protection system. Mexicans in more modern, urban, central and northern environs tend to have access to pension and health care plans at a much higher proportion than the rest of the population. There are corresponding differences in the quality of services, the value of benefits and the taxes paid to support each system. Reducing this gap has been a goal of Mexican social policy, yet other, legitimate goals also compete for budgets: a large middle class is demanding improvement in its existing health care services in addition to wider access to childcare and other benefits; a growing number of retirees press for higher pensions and other aging related benefits, and employers oppose higher taxes on the basis of competitiveness. Given these competing interests, it cannot be said that reducing poverty has been the main goal in the policy agenda. Existing social security agencies follow a traditional tripartite model. Workers, employers and the government contribute money to the funds. Affiliation with a worker or retiree extends coverage to spouses, minors and elder dependents. Many families can receive dual coverage (for example, if one member works in the private sector and another holds a public sector job), and labor market turnover generates transitions across agencies. Our best estimate of actual coverage is approximately 49 percent of Mexico’s total population. Social security has operated pension and health programs since its inception in 1943. It added a childcare program in 1973, but it does not yet include any employment program, either passive unemployment insurance or active labor policies. From an administrative point of view, social security is a centralized program. Two federal agencies provide the largest share of services. The Mexican Social Security Institute (IMSS) registered 16.9 million active workers and 3.5 million retirees by August 2014. The agency for public employees (ISSSTE) registered 3.6 million workers and 1.8 million retirees by December 2012. The IMSS also registered a significant number of non-workers (6.8 million) by August 2014; these are mainly students in public universities, participants in employment programs and voluntary contributors such as former salaried employers who contribute to preserve their entitlement to health insurance and accrue pension contributions. About an additional 2 percent of the population is covered by agencies that specialize in serving state and municipal employees and the armed forces. The non-contributory programs have less structured histories and less centralized agencies than those of social security. These programs are usually managed directly by federal ministries rather than by agencies, as is the case with social security. The Social Development Ministry (SEDESOL) is in charge of pension and CCT programs, and the federal Health Ministry (SSA) is in charge of the financial and regulatory functions of health programs, with final provision of health service under the oversight of the SSA or state health ministries. Other ministries manage a variety of social programs; for example, the Ministry of Agriculture manages employment programs in rural areas, the Ministry of Communications and Transportation manages rural road programs and the Ministry of Environment manages community environmental programs. 124

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We will describe the major characteristics of the Mexican welfare state system following a conventional classification of social services into pension, health, family and employment programs.

Pensions Non-contributory pension programs were virtually non-existent until the early years of the 21st century, when programs paying pensions to the poor rural elder population or to the elder population in cities began operating. The pension program for older adults (Pensiones para el Adulto Mayor, originally called 70 y Más) has become the main channel for funneling money to those lacking in social security entitlements. The program provides a monthly pension of approximately US$40 (580 pesos in 2014), and by late 2013 it was paying benefits to 4.8 million individuals. In 2013, the budget for this pension program was smaller than for the Prospera program (discussed later in this chapter), but by 2014 it was higher (SEDESOL, 2014). Thus, the flow of payments towards the elder poor has already become higher than CCT payments, which are related mainly to children. At the state level, at least 13 out of 32 states had some sort of pension program for older adults, often in the form of food support (usually provided in the form of a debit card used in supermarkets). By 2014, the federal government has offered no programs providing non-contributory pensions for the disabled and orphans, but the Peña Nieto reform has advanced modestly to enact a benefit for widows with children and for orphans. Social security pension schemes, meanwhile, have been transformed into individual retirement account (IRA) systems.The reform to transform the IMSS scheme into IRAs was enacted in 1995, and the system began operations in 1997. Public sector schemes usually provide benefits above IMSS levels. Disability benefits are, in the vast majority of cases, near 40 percent of the worker’s taxable wage. For old-age pensions, workers retiring roughly until 2035 will receive pensions under the old pay-as-you-go regime. For younger workers, benefits will be paid out of the IRA scheme. Replacement rates under the new regime are expected to be low because of low contribution rates and low returns: The contribution rate deposited into pension funds is only 6.5 percent of the taxable wage, plus a subsidy known as the Social Contribution paid by the federal government (Cuota Social ) and a contribution of 5 percent of taxable wages, managed by a National Housing Fund (INFONAVIT). Returns on investment were above inflation during 1997–2007, but have been near zero and negative, in inflation-adjusted terms, since the beginning of the Great Recession (Figure 7.1). For example, a worker contributing continuously for 45 years at the average level of earnings is expected to draw a replacement rate of only 39.6 percent (CISS, 2012). Given that most workers (women in particular) have discontinuous work histories, many pensions will end up at the guaranteed level, which is only slightly higher than the minimum wage. Mexico’s national public expenditures on pensions, overall, are the lowest among OECD countries, at 1.7 percent of GDP in 2013 (OECD, 2014). Even by Latin American standards, this is a low figure (e.g. Chile spends 3.6%). Today, half of Mexico’s population covered by non-contributory programs expects to receive only a very low pension from such programs as Pensiones para el Adulto Mayor. Those registered with social security can expect to receive a pension related to their taxable income, but replacement rates are expected to be low. In the absence of a general pension scheme, the country lacks a platform from which to articulate the fiscal aspects, service solutions and multiplicity of programs for the elder population and disabled that currently exist.The series of reforms towards IRA schemes has solved part of the problem because it gives workers contributing to different social security funds over their 125

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Percentage of persons in poverty

80.0 69.0

70.0 60.0

53.1

40.0

20.0

53.6

52.4 46.9

50.0

30.0

63.7

50.0

21.4

30.0

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24.7

24.7

17.4

18.2

41.7

37.4 29.7

47.2

21.2

52.3

25.5

26.6

28.0

18.6

18.8

19.7

42.9

31.8 26.9

33.3

10.0

51.1

47.8

24.1

20.0

20.9

14.0

0.0 1992 1994 1996 1998 2000 2002 2004 2005 2006 2008 2010 2012 Nutritional poverty

Poverty in capabilities

Poverty in assets

Figure 7.1 Percentage of population in poverty under the income dimension (1992–2012)

working lives a single IRA account. The reform proposed by President Peña Nieto, meanwhile, aims to integrate the pension system, but at the time of the drafting of this chapter details have not been provided.

Health programs All Mexican families are covered by a health plan, either by social security or by Seguro Popular. Approximately one-half of the population is registered with social security because the breadwinner is a worker, because he or she is a retiree, because of specific conditions (e.g. students in public universities and participants in federal training programs are registered by default), or because he or she has decided to make voluntary contributions. Those who are not covered by social security are automatically eligible for Seguro Popular, a program enacted in 2003 that provides a basic care package and financing for a few high-cost hospital interventions known in the regulations as “catastrophic expenditures.” The map allocating families to health insurance providers, meanwhile, is virtually the same as the map that distributes responsibility in the pension system. The reason for this is that registration to social security usually involves both benefits. For health services, however, the map linking families with providers has important variations because families often demand services from private providers not financed by public programs. In 2014, the total federal budget for health services was 502 billion pesos (US$38 billion), of which social security agencies represented 58 percent.Within social security, IMSS absorbs 75 percent of resources and covers approximately 85 percent of the population receiving benefits, including public sector workers and armed forces members, who receive relatively more benefits than the general population. Total national expenditures on health services are on the order of 1 trillion pesos, or US$76 billion, for 2014. Private expenditures are estimated at nearly half or more of national health services spending, between 47 and 52 percent according to official estimates.1 Because the private insurance market is small, out-of-pocket expenses paid by families are nearly as large as the total cost of the public system. In 2013, public expenditures on social security (IMSS) 126

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were US$260 per person while the cost of Seguro Popular averaged US$227 per person.2 However, social security receives additional contributions from employers and employees. Insurance coverage, meanwhile, does not guarantee actual services received. Public plans are vertically integrated and never finance expenditures by families.3 This means, for example, that a family insured by IMSS can receive insurer-paid health services only at IMSS facilities, and that a family insured by Seguro Popular can receive services only at SSA facilities or the state health ministry. Thus, families are continuously faced with the decision, when in need of emergency or primary hospital care, between going to a public or private sector provider. Given that the money-marginal cost of public providers is zero, any decision to demand private services can only follow a perceived difference in quality. Quality often includes waiting times in addition to, in some cases, the actual quality of care. Waiting times in the private sector are zero if the consumer is willing to pay the price. This mix of monetary and time costs induces patterns of selection that differ across services. In recent decades, the private sector has expended substantially and today includes a significant number of pharmacies that offer on-site medical consultations. For emergency care, by contrast, the private supply has grown very slowly because patients are quickly referred to public hospitals. For non-emergency hospital care, the population selfselects based on their ability to afford the cost of interventions: for relatively medium- to lowcost interventions, the family may go to a private provider, but for high-cost events, the costs of waiting for consultations, medications and hospital care from a public provider are more easily justified. This specialization has been refined further: the private supply has grown for ambulatory services that complement the deficiencies of public hospitals. Families might also buy laboratory and diagnostic services in the private sector and take the results to a physician in a public hospital. In a large system like Mexico’s, with a variety of public suppliers and large differences in the economic possibilities of families, these behaviors are not norms but, rather, appear in a heterogeneous fashion across the system. In economic terms, the growth of the private system in Mexico subjects the public sector social security plans to moral hazards and adverse selection. Because families do not have access to integral health plans, they mix public offerings with purchased services in the private market. The Peña Nieto administration has vowed to take on this issue as part of its Universal Social Security drive, but to date has provided no details.

Family and employment programs The category of family programs covers those programs that provide family allowances, maternity or paternity support, childcare, long-term care and family related services. Employment programs cover passive (unemployment insurance) and active (e.g. training, workfare) labor programs.The family programs offered by Mexico’s social security agencies focus almost exclusively on childcare and maternity subsidies, and there are no significant family allowance programs. Childcare programs, in other words, offer minimal coverage. A 2013 National Employment and Social Security (INEGI, 2013) survey found that out of 3.6 million children who required childcare at a given point in time because of parental work, only approximately 350,000 received care in a public institution, approximately 180,000 of these in a social security facility. Maternity subsidies, meanwhile, only cover mothers who are employed and contributing to social security. For families not affiliated with social security, the main family programs fall under the CCT category. There are no passive or active labor programs of substance in Mexico. Public expenditures for these are essentially zero, amounting to 0.1 percent of GDP according to the OECD (2014). 127

Gabriel Martínez

Programs operated by the Federal Labor Ministry provide training to workers, but their coverage is small. For example, the maximum historical budget for them, allocated in the recession year of 2009, reached approximately 1.5 billion pesos (US$110 million) and has declined every year since then (STPS, 2012). The next section focuses on conditional cash transfer programs, which became a primary tool of Mexican social policy approximately two decades ago.

Special focus: Conditional Cash Transfer (CCT) systems During the 1990s, Mexican social policy adopted the conditional cash transfer model as a generalized approach to reaching the poor with a supply of services while providing families with incentives to engage in the construction of human capital.The CCT policy has received favorable evaluations in general, and has become a main component of the Mexican welfare system. In this section, we describe the origins, motivations and main results of this change.4 Social policy directed towards the poor was based, until the early 1990s, upon generalized and targeted subsidies. By the mid-1990s, federal expenditures on those subsidies were equivalent to US$3.7 billion. The targeting of the poorest families, however, was less than effective. Only 27 percent of all subsidies were targeted to them, and 77 percent of all subsidies went to urban areas. The metropolitan area of Mexico City, the wealthiest in the country, received onequarter of all targeted subsidies and 30 percent of generalized subsidies. Late in 1994, a major public financial crisis ensued (the “Tequila Crisis”), and the government was faced with the challenge of supporting the very poor through programs that had become increasingly expensive and inefficient. In that environment, a new idea gained traction: to improve targeting in a qualitative way and to use concepts from human capital theory to reduce fiscal pressure and produce better social results. Indeed, it seemed that general subsidy programs were creating a deadweight loss due to trade liberalization. Among generalized subsidies, programs to support the price of corn tortillas and wheat bread took most of the budget. In the past, the government would impose international and domestic restrictions on the grain trade and on the manufacturing of food to reduce the cost of subsidies. By 1996, following trade liberalization, the price differential between subsidized and official prices of corn was 73 percent. The government had attempted price controls in the past, but by the mid-1990s, with NAFTA in force, the price control tool was very costly to manage. The old targeted programs were not exempt from criticism. They were operated by a multiplicity of agencies and two-thirds of their coverage went to urban dwellers: a full 60 percent of rural families received no benefits from these programs. In that environment, the decision was made to adopt Progresa, a program that targeted the poorest of the poor with coordinated efforts in areas of health, education and nutrition. In 1997, the estimated target population for this program was 4.8 families, a number that increased to 5.4 million by 2003, of which 88 percent were being served. Progresa worked by adopting targeting mechanisms designed to facilitate reaching the poorest families and avoiding errors and political interference.The federal government began to produce a detailed analysis of income levels and the educational, nutritional and health characteristics of locations, and to survey each family in the poorest locations. Families were selected through a point system, and a community assembly validated the information. Detailed rules on budgeting and the disbursement of funds were also issued to increase transparency and to provide a framework for auditing and accountancy.The program was renamed Oportunidades in 2002 after a change in party power. 128

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In contrast with the old strategy of generalized subsidies and price controls, Progresa was able to define goals such as elementary school graduation, nutrition and health outcomes, exposure to risk by families and income redistribution. To this effect, the program focused on three components – education, nutrition and health – and each component has a subsidy condition rule. The education rule initially linked a money subsidy with an 85 percent school attendance record by children between grades 3 and 9. Later, the subsidy was extended to grade 12. There are also subsidies for educational materials, and subsidies for girls are higher by middle school. For example, in 2002 a grade 9 boy received the monthly equivalent of US$33 and a girl received US$38. By grade 12, in the same year, a boy received US$57 and a girl received US$66. In comparison, the monthly minimum wage that year was US$145. The health rule determines the number of visits to a health clinic for specific services. The focus is on mothers insofar as the health package is richer in interventions related to pregnancy, maternal health, and preventive care for children, but there are also specific provisions related to teenagers. Third, the nutrition component provides in-kind benefits for pregnant women and new mothers, as well as for children younger than 5 years of age. Families receive a subsidy worth the equivalent of US$15 a month to comply with health clinic attendance, where they receive additional in-kind food support. By 2013, Oportunidades was serving 5.9 million families, 22 percent of whom were urban dwellers and 1.5 million of whom were indigenous. Table 7.1 shows the value of subsidies in 2013. To facilitate comparisons, we show amounts in dollars (calculated at the average exchange rate for the year) along with the ratio of subsidies to average taxable wages for the population registered with social security. The package of available benefits depends upon family composition. For a family with children in elementary and secondary school, the cap is 1,710 pesos, Table 7.1 Value of subsidies in Oportunidades human development program (2013)

Nutritional support Older adult (per person) Complementary nutritional support Child support Educational support Grade 1 2 3 4 5 6 7 8 9 10 11 12

Pesos

Dollars

$315 $345 $130

$24 $26 $10

0.04 0.04 0.02

0.16 0.17 0.06

$115

$9

0.01

0.06

$13 $13 $13 $15 $19 $25 $36 $39 $41

0.02 0.02 0.02 0.02 0.03 0.04 $39 0.06 $43 0.06 $47 0.07 0.10 0.11 0.11

0.08 0.08 0.08 0.10 0.12 0.16 0.24 0.25 0.27 0.40 0.43 0.46

Boys

$480 $510 $535 $810 $870 $925

Girls $165 $165 $165 $195 $250 $330 $510 $565 $620 $930 $995 $1,055

Ratio to average taxable wage

Ratio to minimum wage

(Continued )

129

Gabriel Martínez Table 7.1 (Continued) Pesos

Dollars

Ratio to average taxable wage

Ratio to minimum wage

School material, grades 1 $330 $25 0.04 0.16 through 6 Youth with Opportunities $4,599 0.56 2.29 Maximum subsidies for families with children in listed educational levels: Elementary and secondary $1,710 $130 0.21 0.85 elementary, secondary and per $2,765 $209 0.34 1.38 middle-up Job training First $810 $930 $61 $70 0.10 0.40 Second $870 $995 $66 $75 0.11 0.43 Third $925 $1,055 $70 $80 0.11 0.46 The cap on subsidies does not apply to subsidies for older adults. Note: payments are monthly, except for school materials (yearly), youth with opportunities (only once upon middle-superior graduation). Exchange rate: 13.2 pesos per US$ Average taxable wage of population registered with social security Daily 270.18 Monthly 8,213.47 Minimum wage 2,010.05 Sources: For social security data: IMSS Emision bimestral anticipada, bimestral. For value of subsidies, SEDESOL (2014).

equivalent to US$130. For families with children in secondary school (grades 7–9) and upper middle school (grades 9–12), the cap is 2,765 pesos, or US$209. Thus, the cap fluctuates around the minimum wage and between 21 and 34 percent of the social security average taxable wage. The table also shows that the support per child is independent of gender during elementary school, but in grades 7 through 12 girls receive a higher benefit, reflecting the program’s focus on benefits for job training and Youth with Opportunities. Over the years, Oportunidades was enlarged with additional payments. For instance, older adults can receive “energy” benefits to compensate for the general increase in the price of gasoline, and, more recently, benefits include a direct labor component for students attending a “Multiple Attention Center with Job Training.” Overall evaluations of Progresa/Oportunidades have been favorable. Its goal of moving social policy from a general subsidies framework to a model that dedicates scarce fiscal resources to supporting the poor is evident in its 2003 numbers, when more than 80 percent of federal expenditures for nutrition were channeled through Oportunidades, and only the remaining 20 percent was spent through specific targeted programs. For its part, Progresa was supported by a strategy based upon modern econometric views of best practices for program evaluation. This allowed for the measurement of the program’s impacts on specific variables. Hoddinott et al. (2000), meanwhile, found that overall consumption increased by 14.5 percent between 1998 and 1999 while per capita food consumption increased by 10.6 percent among the general population and by 13.5 percent among the poor. Regarding the demand for health care, Gertler’s (2000) evaluation found between a 30 and 130

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50 percent decrease in the use of hospitals due to improved preventive care and a lower proportion of children with severe malnutrition. Schultz (2000) found that these changes resulted in higher rates of school registration, in particular at the secondary (middle school) level. A second wave of evaluations took place around 2007–2008, and they largely confirmed the earlier findings (the results listed in this paragraph are summarized in Campos Bolaño, 2011). Between 1999 and 2007, malnutrition fell from 61 to 35 percent; stunting from 35 to 24 percent; general morbidity among children younger than 24 months was found to be nearly 4 percent lower; children of families that participated early in the program showed 2 years in educational achievement over non-participants; and children participating in the program since 1998 gained approximately two-thirds of a year of academic achievement over non-participants, with gains being largest for girls (0.85 of an academic year) and indigenous children (0.84 of an academic year). Notwithstanding the significant positive achievements of the CCT programs in Mexico, it is useful to understand them from the perspective of the general welfare, pointing out limitations of the strategy vis-à-vis urban populations and other components of the welfare state. In 2001, the program began serving families in urban environments using the same rules that were being employed in rural settings. Urban families had much higher attrition rates, and 43 percent left the program soon after enrolling, a rate double that in rural areas. It was also estimated that the overall impact of the program in rural areas was smaller than in urban areas; for example, the impact on sick days was near zero in rural areas (SEDESOL, 2011). Nutritionpoverty rates in Mexico, at 21.4 percent in 1992, meanwhile, shot up to 37 percent during the 1994 “tequila crisis,” reaching a bottom of 13.8 percent in 2008, only to crawl up again with the recession that began in 2007, reaching 23 percent by 2012.5 While CCT represents a significant improvement in the effectiveness of state action to support very poor populations, along with these other limitations, the incentive structure of the program does not translate easily into urban environments; its impacts, while significant at the level of individual participants, have not been large enough in comparison with the economic constraints faced by families. The long recession has meant a reverse of the downward trend in poverty rates observed between 1995 and 2007. Thus, in 2010, an alternative model was proposed (Gutierrez, 2011). The government that took office in December 2013 vowed to develop a “Universal Social Security” program. It is too early to know how the government (in power until 2018) will propose developing this program, but a significant reform to the health system has been announced as part of the movement. A return of the old strategy of generalized subsidies, however, is unlikely, partly due to fiscal restrictions and the complexity of administering such a policy under a free trade regime, but mainly because CCT programs have overall positive evaluations and are popular. The federal government maintained its effort to expand Oportunidades’ budgets during the Great Recession (between 2008 and 2010, it increased these by over 20%), but in more recent years, fiscal pressures have kept budgets tighter, with no significant real growth. Indeed, new programs, especially the new Pensión para Adultos Mayores program, are displacing CCT from the budget. Oportunidades, which was changed in 2014 to Prospera, had a budget of only USD 4.7 billion in 2013, raising the legitimate question of whether CCT has reached its peak in Mexico.6 Evaluations of its outcomes are highly favorable, but its marginal effects are low, especially in cities. Although Progresa represented an effort on behalf of fiscal transparency and efficiency and was part of a social movement towards democracy that included a struggle against patronage and other forms of misuse of social programs, the federal government now also faces an important new source of political pressure that will be particularly hard to overcome: namely, retirees as a 131

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growing block of voters demanding health services and pensions. Retirees are generally not in the poorest families (the poor die at younger ages), and they often already have social security and other benefits. Yet, to the detriment of CCT programs, their pressure as voters may become a force in Mexican politics and curtail efforts to support the very poor. This would not mean the demise of CCT, but it would mean that CCT strategy would remained confined to poor rural areas.

Current and future trends of the Mexican welfare state system The structure of the Mexican welfare state has been defined over several decades. Social security was enacted in the 1940s and current policies for the rest of the population were defined during the 1990s. Since then, the structure has been stable in terms of financial flows, covered population, providers of services and regulation. Most of its current structure was defined between the late 1990s and the early 2000s. Between 2013 and 2015, the wave of reforms launched and proposed by the Peña Nieto administration aims to induce major changes in terms of more effective coverage and less inequality. The main trends, however, will be a result of economic, demographic and policy events strongly tinted by the initial conditions. We proceed, therefore, to describe the main initial conditions, to discuss the central policies that are being promoted, and to conclude by proposing a possible scenario for 2020.

The initial conditions The main initial conditions, which will be hard to change, relate to the deep ethnic and economic divides that define Mexican society.The social equilibrium between these divided sectors is especially hard to change due to the persistence of a large informal sector, an aging process that is low compared with other countries yet unstoppable, and budget constraints faced by the government. For Mexico, the Great Recession has represented a setback in the nation’s long-term efforts to reduce poverty. As shown in Figure 7.2, the long-term trend towards lower poverty indexes has been halted by the economic downturn, and a decade of continuous corrosion is not far on the horizon. For the labor market in general, the global crisis that began in 2007 has meant higher levels of unemployment among all types of workers, for both the more and the less educated, the old and the young (Figure 7.2). Whatever the policy trends, Mexico is an ethnically divided country, with some ethnic groups continually at the bottom of the social ladder, a crude reality that often puts a clench on reform efforts. In Chiapas, a southern state, 6.5 percent of the population speaks only an indigenous language and 26 percent know both Spanish and a Native American language. In the central and northern states, the figure for only native language speakers is near zero, and the figure for bilingual speakers is somewhere between zero and 3 percent (INEGI, 2010). In part as a consequence of these ethnic divides and in part as a consequence of inequality among family incomes, Mexico is a country with sharp regional health status differences. Chiapas has much higher rates of mortality from preventable diseases, such as tuberculosis or intestinal infections, on the order of 10 times higher. It is quite likely that the low figure in the area of perinatal deaths for Chiapas reflects underreporting due to lack of hospitalization rather than to improved conditions. In fact, Figure 7.3 confirms that Mexico is a country in which half

132

The Mexican welfare state system Unemployment rate by educational level, females 0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01

Secondary incomplete or less

20

11

-II

I

-I

I

11

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10

-II

-I 20

10

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-II

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-I 09

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Secondary graduate or more

Unemployment rate by educational level, males 7% 6% 5% 4% 3% 2% 1%

Secondary incomplete or less

20 10 -I 20 10 -II I 20 11 -I 20 11 -II I

III 9-

20 0

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20 0

8-

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-I 08

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III 7-

-I

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07

20

III 6-

20 0

20 06 -I

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20 0

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-I

0%

Secondary graduate or more

Figure 7.2 Unemployment rate by educational level

of the people are poor; in some states, more than 3 out of 5 inhabitants are poor, and in most states the poor constitute 40 percent or more of the whole population. Meanwhile, a primary issue that is one of the motivations for the Universal Social Security initiative is the informal economy. Many workers are not salaried, and many are not registered even if working under a salaried labor relationship. The informality issue has been the target

133

Gabriel Martínez 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 Distrito Federal Nuevo León Sonora Baja California Colima Coahuila Baja California Sur Sinaloa Querétaro Aguascalientes Tamaulipas Morelos Chihuahua México Jalisco Quintana Roo Yucatán Guanajuato National Campeche San Luis PotosÍ Nayarit Tabasco Hidalgo Veracruz Michoacán Tlaxcala Durango Zacatecas Puebla Oaxaca Guerrero Chiapas

0.0

Below minimum welfare line

Below welfare line

Figure 7.3 Population with incomes below the welfare line and the minimum welfare line (2012) Source: CONEVAL (2016).

of research, but there is no consensus on its causes. Nevertheless, in Mexico the issue is clearly related to the existence of micro-firms. While workers in large firms are protected by social security in nearly 9 out of 10 cases, the ratio is less than 1 in 10 for firms with fewer than five workers (Figure 7.4). For very small firms, there are fuzzy borders between being an independent worker, a family worker, a servant or a small entrepreneur. The lack of coverage in small firms is predictably correlated with ethnic differences and the poverty gaps. Workers in poor families are part of an intergenerational cycle of low human capital formation and low mobility, which is why policy makers are pushing towards environments of improved schooling and increased job opportunities. The welfare state depends critically upon the ability of national states to collect taxes and follow an orderly debt management process. Mexico is a low-tax country; indeed, its tax rates on personal income are among the lowest when compared with OECD countries with transition economies. In Figure 7.4, the tax wedge in Mexico is smaller than in the rest of the North American Free Trade Agreement (NAFTA), is larger than in Chile and is not much smaller than in Korea. If the burden that applies in Korea and Chile is a more relevant standard for Mexico than that of other, wealthier countries, then increasing taxes will be necessary but not easy.With regard to public debt, the Mexican treasury has been managing a steep process of increasing liabilities: public debt increased more than eight times between 2008 and 2013, while real GDP has grown only 33 percent. Annualized, the corresponding rates are 18 percent for public debt and 2 percent for GDP (SHCP, 2014).

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Tax burden a % of labor cost

35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0

2000

2005

Mexico

2006

2007

Canada

2008

2009

2010

United States

2011 Chile

2012

2013 Korea

Figure 7.4 Income tax plus employee and employer contributions less cash benefits, single persons, 100% of average earnings

This combination of events poses a riddle for Mexican social policy makers. While the government has been increasing taxation rates on labor since 2008, with the 2014 reform marking the largest single increase, most workers remain out of the formal system, and even for those who are in, the capacity to pay taxes is relatively low because income is so unevenly distributed. Thus, the government can obtain higher tax flows only by taxing a growing but still minority middle-class and wealthier families, who probably have a high elasticity of taxable income and thus are difficult to tax. Still, some analysts believe that higher taxation is feasible and, given the difficult restrictions faced by the government, a scenario of higher taxes cannot be discarded.

Summary and conclusion Mexican social programs are segmented between social security agencies and programs and groups serving those families not registered with social security, who are mostly poor, often indigenous and tend to inhabit the southern states. The structure of Social Security and its agencies cover roughly half of the population and have been stable since the 1990s, and efforts to reduce their informality have largely been unsuccessful. The main reform efforts since the 1990s have centered on the pension system for a growing aging population and on programs dedicated to serving the poor. A conditioned cash transfer scheme was introduced in the 1990s, however, to replace the old system of in-kind subsidies. New strategies have involved providing incentives to families to support human capital growth, and evaluations of this approach have generally been favorable. The current administration has vowed to develop a Universal Social Security System to reduce segmentation and to allow poor families to transit into wider social security programs, facilitating the overall regulation of pension and health plans, but effectively implementing this plan may result in higher taxes, which is made problematic by Mexico’s uneven income distribution.

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Notes 1 OPS/OMS (2013), p. 161. 2 Calculations provided by Maria Quintana on the basis of: IMSS (2013), page 57, Secretaría de Salud (2012), and ISSSTE (2013). 3 The only exceptions are reimbursements that arise after complaints, and they amount to less than 0.01 percent of total expenditures. 4 This section has benefited from the discussion by Levy and Rodriguez (2005). 5 The National Evaluation Council (CONEVAL) publishes three poverty measurements based upon (1) a nutritional criteria, (2) a “capacities” criteria, (3) an “assets” criteria. The covariation over time is very high, so the comment in the text applies to any of these.This information is updated regularly at http:// www.coneval.gob.mx. 6 The total budget figure is not found easily in the federal budget because different components are allocated to different agencies. CONEVAL is the most reliable source for checking total budgets.

References Campos Bolaño, P. (2011), Documento Compilatorio de la Evaluación Externa 2007–2008 del Programa Oportunidades, Secretaría de Desarrollo Social, Coordinación Nacional del Programa de Desarrollo Humano Oportunidades: México City. CISS (2012), Americas Social Security Report: Fairness, Work, Retirement, and Social Protection, Inter-American Conference for Social Security: México City. CONEVAL. Medición de la Pobreza, Mexico: Consejo Nacional de Evaluación de la Política Social, http:// www.coneval.org.mx/. Gertler, P. J. (2000), Final Report: The Impact of PROGRESA on Health, report submitted to PROGRESA, International Food Policy Research Institute: Washington, DC. Gutierrez, J. P. (2011), Aspectos Generales de la Evaluación de Mediano Plazo del Programa Oportunidades en Zonas Urbanas. Evaluación Externa del Programa Oportunidades en Zonas Urbanas (2002–2009), Secretaría de Desarrollo Social, Coordinación Nacional del Programa de Desarrollo Humano Oportunidades: México City. Hoddinott, J.; Skoufias, E., and Washburn, R. (2000), The Impact of PROGRESA on Consumption: A Final Report, International Food Policy Research Institute: Washington, DC. IMSS (2013), Informe al Ejecutivo Federal y al Congreso de la Unión sobre la Situación Financiera y los Riesgos del IMSS, 2012–2013, Instituto Mexicano del Seguro Social: México City. INEGI (2010), Censo de Población y Vivienda 2010, Instituto Nacional de Estadística, Geografía e Informática: México City. ——— (2013), Encuesta Nacional de Empleo y Seguridad Social, Instituto Nacional de Estadística, Geografía e Informática: México City. ——— (2014), Mexico en Cifras: Información Nacional, por Entidad Federativa y Municipios, Instituto Nacional de Estadística, Geografía e Informática, México, http://www3.inegi.org.mx. ISSSTE (2013), Informe Financiero y Actuarial, Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado: México City. Levy, Santiago and Rodriguez, Evelyne (2005), Sin Herencia de Pobreza: El Programa Progresa-Oportunidades de México, Banco Interamericano de Desarrollo: Washington, DC. OECD (2014), Society at a Glance 2014, OECD: Paris. OPS/OMS (2013), OPS/OMS en México – Cobertura Universal en Salud: Lecciones Internacionales Aprendidas y Elementos para su Consolidación en México, Organización Panamericana de la Salud/Organización Mundial de la Salud: México City. Schultz, T. P. (2000), School Subsidies for the Poor: Evaluating a Mexican Strategy for Reducing Poverty, International Food Policy Research Institute: Washington, DC. SEDESOL (2011), Evaluación Externa del Programa Oportunidades 2010 en Zonas Urbanas: Efectos de Oportunidades en Salud y Nutrición, Secretaría de Desarrollo Social, Coordinación Nacional del Programa de Desarrollo Humano Oportunidades: México City. 136

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——— (2014), Cuarto Informe Trimestral 2013: Programas de Subsidios del Ramo Administrativo 20, Desarrollo Social, Secretaría de Desarrollo Social, Dirección General de Seguimiento: México City. Serrano Espinosa, J. (2008), ¿Nos Movemos? Movilidad Social en México, Fundación Espinosa Rugarcía: México City. SHCP (2014), Estadísticas Oportunas de Finanzas Públicas, Secretaría de Hacienda y Crédito Público, México, http://www.shcp.gob.mx. STPS (2012), Secretaría del Trabajo y Previsión Social, México, http://www.empleo.gob.mx. WB, World Bank (2014), World Development Indicators, http://data.worldbank.org.

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8 The Chilean welfare state system With special reference to social security privatization Silvia Borzutzky and Mark Hyde

This chapter presents an overview of Chile’s welfare system with an emphasis on the characteristics and impact of the health care and the fully funded defined contribution (DC) pension systems. Chile’s welfare system began to develop in a piecemeal fashion in the 1920s and expanded both in terms of programs and coverage between the 1920s and the early 1970s. The two main pillars of Chile’s social welfare policies were multiple social security programs and the provision of health care. Neither unemployment insurance nor social assistance programs have played a large role in the history and evolution of welfare programs in Chile. Consequently, this chapter will concentrate on the evolution and nature of social security and pension programs and the health care system emphasizing the role that the state and the market have played in the process. A more recent unemployment insurance program will be briefly analyzed. It is important to note that both the social security and the health care systems were substantially modified by the Pinochet dictatorship that assumed power in 1973. While pensions were fully privatized under a fully funded DC system, the health care system experienced partial privatization and a substantial transformation both in terms of its institutional structure and financing. Above all perhaps, these policies were central to the neoliberal economic model embraced by the Pinochet regime, which strengthened the role of the market and the private sector and reduced the socioeconomic functions of the state. After the transition to democracy in 1989, the privatized approaches to pensions and other social programs were preserved as a result of the pacted nature of the transition and the support for the market economic policies among the new governing elite. Indeed, the entire economic structure established during the Pinochet regime has not been substantially modified by any of the post-Pinochet governments. These concerns are developed here in three ways. First, we develop a contextual summary of welfare provisions in Chile, including the early history of social security and health care, the major reforms enacted by the Pinochet regime, and the partial reforms that have occurred since 1990. Second, we explore the role of the market and the state in the health care system, particularly the legacy of the Pinochet regime, which has been one of fiscal austerity and partial privatization. This approach has created a social division of welfare in which the most advantaged socio-economic groups are able to rely on a well-resourced private health care system, while the majority of Chileans are required to depend on an ailing state system. Third, we examine 138

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the role of government and the private sector in the social security system and in particular, the ways in which marketization has determined the structure of programs and income transfers. The overwhelming theme is one of pension failure, resulting in substantial economic diswelfare for Chilean workers, and a growing role for the state in propping up the private system.

Historical development of Chile’s welfare state system Like most Latin American countries, Chile did not develop a social welfare system along the Western European lines. Initially, the Chilean state enacted a set of social security policies in the mid-1920s which provided retirement benefits for key interest groups, including the military, civil servants, and selected industrial workers. Since its inception in 1924, the Common Fund, Pay as You Go (PAYG) social security system was geared to protect selected groups and expanded in an amorphous and piecemeal form. By 1973 the different programs covered about 75 percent of the population through more than 600 different funds and through massive legislation full of privileges and special benefits to those interest groups that could exercise political or economic power (Borzutzky, 2002). Referring specifically to Chile, Carmelo Mesa-Lago highlighted the “massification” of social security benefits (Mesa-Lago, 1976), which was followed by a massification of privileges and exemptions that significantly distorted the basic notions of equality and universality that should be at the core of a social security system. As a result, the system was very expensive both for the state, the insured, and the employers. Moreover, the pensions received by the majority of the population were insufficient, reinforcing both persistent poverty and inequality. Attempts to reform the system during the Jorge Alessandri and Eduardo Frei Montalva administrations (1958–1964 and 1964–1970) were frustrated by the power of the interest groups that received sizeable pensions and a variety of other benefits (Borzutzky, 2002). The only other important social program that appeared before the mid-20th century was a health care system linked in most cases to the existing pension funds. Conspicuous by their absence from the social welfare system are policies such as unemployment insurance and social assistance. Such provisions did not become part of the Chilean social landscape until the beginning of the 21st century. This means that any consideration of Chile’s welfare policies is really dealing with two sets of provisions: those related to social security and health. As with other Latin American countries, the basic concepts of universality and sufficiency that inspired similar programs in Europe are missing from these programs. In fact, in Chile as well as in most Latin American countries, benefits were granted on the bases of the political power of those involved in critical occupational activities such as civil servants, the military, and workers involved in economic activities that were central to the country’s economic survival, such as copper workers in Chile or oil workers in Venezuela (Mesa-Lago, 1976). The Pinochet regime (1973–1989) brought about massive changes in the country’s economic and the social policy areas. Those changes, inspired by a market-oriented philosophy that has been analyzed elsewhere, privatized the administration of pension funds and partially privatized the health care system, while massively reducing the funds for health, education, and other social programs.The outcome of these economic policies was massive increases in poverty and inequality that had to be addressed by the democratically elected governments that came to power after 1990. Regarding cost, from the mid-1970s to the early 1990s, spending on all these programs ranged from as little as 19 percent to as much as 26 percent of GDP. The majority of those funds were dedicated to health and pensions (ITA, Chile Welfare Institutions and Social Programs). Persistent poverty and inequality made governments at the beginning of the 21st century rethink and expand their approach to social welfare and begin a process of developing and 139

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implementing a variety of social assistance programs and modifying the existing market-oriented policies. Both the pension and the health care system were reformed between 2005 and 2008 and social programs’ funding has been increasing substantially since the beginning of the transition to democracy.The government’s approach to social assistance involved the creation of a wide array of programs including Chile Barrio, or Chile Neighborhood; Chile Solidario, or Chile in Solidarity; Chile Emprende, or Chile Enterprise; and Chile Crece Contigo, or Chile Grows with You.These initiatives were developed between 1998 and 2007 as part of the democratic governments’ ongoing commitment to social action by the state and tried to respond to the prevailing understanding of the causes of poverty and social equity and their solutions. Some of these programs have been temporary and often used as a palliative or a quick response to specific socioeconomic crises. Others have been more permanent, but none of them has received a large amount of funding.

The health care system This section will outline the evolution of the health provision in Chile and the legacy of the Pinochet regime, and it will discuss the current problems and policies affecting the health system. Special emphasis is placed on the Plan AUGE, which provides the structure for Chile’s public health provisions.

From state to market: 1952–1990 While early concerns for public health in Chile can be traced back to the origins of the country, it was not until the mid-20th century that the state began to play an active role with the creation in 1952 of the National Health Service (SNS). Its functions were to provide medical attention to blue collar workers and indigents; to supervise the general health conditions of the country; and to be responsible for general preventive medical functions. The establishment of the SNS was followed by the establishment of SERMENA (Servicio Médico Nacional de Empleados or Employees Medical Services) in 1960 that was charged with providing curative services to white collar workers and civil servants. Other interest groups, such bank and copper unions, were able to create separate and more comprehensive health programs and services around their pension plans.Thus, the entire health structure reproduced the separation between blue and white collar workers already existing in the social security system (Merino, 2002: 17–32). By 1973, the SNS employed about 120,000 people and provided basic hospital coverage to about 70 percent of the population. However, the system was plagued by problems including long waiting lists and outmoded medical facilities. The Pinochet regime introduced substantial modifications to the organization and financing of Chile’s health delivery system. As with social security, the policies were framed by the idea of the subsidiary state which aimed at withdrawing the state from the provision of social services and regulatory activities and transferring those responsibilities to the individual and to private health care providers. The policies evolved from the drastic reduction of funds in the early years of the regime to a major transformation of the system in 1979 which replaced the National Health Service and SERMENA with the National System of Health Services (Sistema Nacional de Servicios de Salud), organized on a geographical basis and eliminating the distinction between blue and white collar workers. As structured by the Pinochet technocrats the benefits are provided by one of the 26 Autonomous Regional Health Services (Servicios de Salud Autónomos). However, primary care facilities were transferred to the municipalities, creating a new source of inequality in the nature and extent of the care, given the huge income disparities among the different localities. 140

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The creation in 1981 of ISAPREs (Instituciones de Salud Previsional) signaled the introduction of a new market oriented approach to health. ISAPREs, modeled after health maintenance organizations (HMOs) in the United States, are “private entities that offer a series of medical insurance and workman’s compensation packages in return for a basic 7 percent payroll contribution plus an additional premium of 2–3 percent depending on the size of the package” (Cartin, 1999: 210). Until 1998, the government offered a 2 percent subsidy to low-income citizens to join an ISAPRE. The subsidy was later eliminated due to its negative effects both on the public health system and on the health of the low-income groups, who often were attracted to the ISAPREs by their propaganda and not by the quality or quantity of the services. In fact, for many, the services provided by the ISAPREs were or are more expensive than the ones offered by the public system. Thus, since 1981 Chileans have had the option of depositing the 7 percent mandatory health tax either into the public or the private system.The public system is administered by FONASA (Fondo Nacional de Salud or National Health Fund), which in turn provides the insured the option of receiving attention, either through one of the public hospitals or through a system of vouchers financed partly by FONASA and partly by the insured. The vouchers allow the insured to get attention from participating physicians and hospitals. If the insured chooses the private system, the 7 percent goes to the selected ISAPRE, which in turn offers a variety of plans. Depending on the plan, the insured will need to make additional contributions ranging between 4 and 7 percent of wages.

Post-Pinochet policies: increasing health care spending and regulating the ISAPREs The Concertación coalition that came to power at the end of the Pinochet dictatorship and ruled Chile between 1990 and 2010 (and is currently in power; although the name changed to Nueva Mayoría, the parties forming the coalition are basically the same) had to face a number of critical problems in the health area including lack of resources, the unregulated and discriminatory actions of the ISAPREs, and the redefinition of the relations between the private and the public health care sectors. In fact, the Pinochet regime’s market legacy was not limited to the administrative reorganization and the creation of the ISAPREs, but also included a constant reduction of funds which affected the quality and quantity of the services provided by the public system. The reduction of funds resulted in a poor and decaying infrastructure, poor salaries, lack of equipment and long waiting periods. In view of these problems, a central goal of the Concertación governments was to increase health care spending. In 1990 public health care spending amounted to a meager 157,616 million pesos. By 2002 public spending had increased to 596,673 million pesos (Misoni and Solimano, 2010). This rapid increase in funding has continued and according to the World Bank by 2011 health expenditure as percentage of government expenditure was 15.1 percent. It is important to note that out-of-pocket health expenditure, or the percentage of private expenditure in Chile, amounts to a very high 64.3 percent of total health spending, and that health spending per capita amounted to US$947.2 in 2010 while total per capita health spending equaled US$1,198.70 in the same year. For the same year, public spending amounted to 16.3 percent of total government spending and 3.2 percent of GDP (trading economics, health expenditure – public, percent of government expenditure, in Chile). The major accomplishment of the post-Pinochet administrations has been a rapid budgetary increase which has been reflected in improved services. Figure 8.1 illustrates the evolution of spending in the last 10 years. Prior to 1990, the ISAPREs were fairly unregulated and the result was persistent discrimination against the elder population and women, as the ISAPREs refused to insure those that 141

Silvia Borzutzky and Mark Hyde 17 16 15 14 13

Jan/02

Jan/04

Jan/06

Jan/08

Jan/10

Jan/12

12

Figure 8.1 Health expenditures as percentage of government expenditure Sources: TE (2015), WB (2015).

either for reasons of gender or age were likely to incur high medical costs. While keeping the ISAPREs in place, the post-1990 policies have been geared to increase regulations through the establishment Superintendencia of ISAPREs (ISAPREs Superintendence) in charge of reducing some of the abuses and discriminatory practices. Additionally, laws enacted in the early 21st century have limited and sanctioned the discriminatory policies of ISAPREs. Another major bone of contention has been the financial relationships between the ISAPREs and the public system represented by FONASA. In practice, the public system acts as a catch-all system, because those insured by the ISAPREs can at any time transfer to the public system and even seek medical attention in the public sector, either because the ISAPRE does not cover a particular ailment or because of the poor distribution of services provided by the ISAPREs throughout the country. Data for 2005 indicated that about 17 percent of those served by the public system were in fact enrolled in and paying fees to an ISAPRE (  Joint Learning Network for Universal Health Care, Compare Population Covered).

The Lagos administration: catastrophic illness, hospital construction and the new Plan AUGE By the turn of the century the Lagos presidency (2000–2006) had to confront major challenges in the health area including the need to provide coverage for catastrophic illnesses, the problem of insufficient funding, as well as the need to increase the public sector’s efficiency. In order to solve these problems the administration created a system of protection against catastrophic illnesses, increased the health budget, and implemented the Plan AUGE, which aims at providing a comprehensive approach to health provision. Chileans are living longer. Life expectancy increased from 54 years in 1952 to 80 years in 2012 (WHO, 2014), and increased life expectancy has increased the chances of suffering a catastrophic illness. As a result the Lagos administration sought to address this issue by mandating a catastrophic illness protection or insurance both in the private and the public sector. It is important to note that a catastrophic illness is defined by cost and not by the nature of the disease. In spite of the rapid budget increases, insufficient funding is still the most critical problem in the health care system.Thus, by 2005 the system was still underfinanced, provided unequal benefits and services, and there was a deficit of hospitals and other health care facilities.To solve this problem the Lagos and subsequent administrations have resorted to the privatization of hospital construction and administration. Here, the governments are using the same model that has been 142

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applied to the construction of roads and prisons, according to which the private enterprise that undertakes the project is also in charge of its administration until the builder has recovered the costs and made a profit. As with Chilean highways, the building company charges a “toll” for the use of the hospital facilities. In the words of the Ministry’s spokesperson: The profits for the company responsible for the construction and administration of the facility will result from the “toll” charged to patients for the use of the facilities and clinical services.To the extent that these are profitable projects, based on users’ fees, the government can rely on private funds for the construction of new facilities. (Duran, 2003) Despite some political opposition the idea of privatizing hospital’s construction and administration is widely used and the hospitales concesionados have appeared all over the country.The idea of introducing autonomy and competition among hospitals has also gained support among policy makers who expect to get lower costs and a more efficient administration. As for the structure of the system, the Lagos administration had to face the fact that the 7 percent wage tax that Chileans have to dedicate to health is insufficient and does not cover the basic needs of either the public or the private system. In the case of the public system, the wage tax covers only about 50 percent of the budget and the other 50 percent is financed through fiscal subsidies. Additionally, the public sector budget was affected by the presence of a private system that covers only about 16 percent of the population, is expensive and serves mostly high-income groups and young males. The state on the other hand, insures about 83 percent of the population through FONASA and the Ministry of Defense and has been left with the task of caring for the poorest, the elder population and the very sick. In Chile, as elsewhere, these groups have high health expenditures and generate small contributions. The solution took the form of the plan AUGE which is today at the center of Chile’s health care system. AUGE or Plan de Acceso Universal con Garantías Explícitas (Plan of Universal Access and Explicit Guarantees) was announced in April of 2002 and aimed at creating an integrated health system, in which the state guarantees the comprehensive and speedy treatment of 56 pathologies and 1,600 diagnoses by both public and private health care providers. Among the main benefits are the provision of integral maternity care, including a pre- and post-natal subsidy; care for patients with diabetes, hypertension, epilepsy, HIV/AIDS, cancer and neurological diseases, among others. Together these diseases amount to about 80 percent of the health care spending and also about 80 percent of deaths (Ministerio de Salud, Plan Auge). What needs to be emphasized is that AUGE did not involve the provision of new benefits, but a new form of financing benefits already being provided by either the private or public sectors, but which in practice the public sector could not afford and the private sector often refused to pay. AUGE entails a set of four guarantees: (1) guaranty of access, which forces both the public and the private health care providers to make available the required medical attention for those suffering from one of the pre-established illnesses; (2) guaranty of opportunity, which ensures prompt attention; (3) guaranty of quality, which ensures access to medical attention in the form and conditions established by the law; and (4) financial guaranty that the money is there to pay for the required services and that the insured will never pay more than 20 percent of the expenses (Law 19, 966). According to its proponents AUGE is a mechanism geared to create a truly universal and integrated health care system that does not discriminate between lower- and high-income patients. In the words of Osvaldo Artaza, former Minister of Health, the plan “entails a commitment to make available to the beneficiaries the infrastructure, the technology and the personnel 143

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needed to satisfy their primary health care needs” (Artaza, 2003). The plan is financed with general revenues including taxes on tobacco, customs and a temporary increase in the sales tax. The new legislation maintained the public system’s obligation to provide preventive medical services, such as vaccination programs, and the maintenance of water and sewage services for the entire population. It is noteworthy that AUGE’s mission was not to create a “kinder or gentler” health care system, but to create a new financial structure and to guarantee the same care to those afflicted by the same illness regardless of private or public affiliation (Table 8.1).Thus, while the approach guarantees a degree of equality not seen in Chile in the past, it has the potential of generating discrimination based on the nature of the disease and not on employment. Was AUGE inspired by a need to rationalize resources? Was the purpose to control and change the way in which medicine is practiced in Chile? Does AUGE limit the freedom of the physicians once a diagnosis is made? The answer to all these questions is yes.Will it bring about better health care for all? We address this issue in the next section. Table 8.1 Health conditions prioritized under Chile’s universal health care plan 2005

2006

2007

1 Delivery care with analgesia

17 Chronic renal insufficiency

26 Refractive errors

41 Arterial hypertension

2 All childhood cancers

18 HIV/AIDS

27 Tooth loss in older adults

42 Encephalitic vascular accident

28 Surgery requiring prosthesis 29 Hypoacusis

43 Diabetes mellitus, types 1 and 2 44 Prematurity

3 Cervicouterine 19 Cataracts cancer 4 Breast cancer

20 Major burns

5 Leukemia (adults)

21 Polytrauma 30 Benign with or without hypertrophy of medullary lesion the prostate 22 Hernia of 31 Pneumonias in the nucleus older adults pulposus

6 Lymphoma (adults)

7 Testicular cancer

23 Tumors and cysts of the substantia nigra pars compacta

8 Prostate cancer 9 Stomach cancer

24 Aneurysms

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25 Diabetic retinopathy (children under 9 years)

32 Orthotics for older adults (canes, wheelchairs, others) 33 Hemophilia 34 Cystic fibrosis

45 Retinopathy of prematurity

2010 57 Epilepsy in patients over 15 years 58 Bronchial asthma in patients over 15 years 59 Parkinson’s disease 60 Juvenile idiopathic arthritis 61 Hip dysplasia

46 Difficult breathing of new-born

62 Integral oral health in pregnant women 47 Accidents 63 Multiple requiring Critical sclerosis Patient Unit care

48 Rheumatoid arthritis 49 Degenerative osteoarthritis

64 Hepatitis B 65 Hepatitis C

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2005

2006

10 Cancer of the gall bladder and bile duct

35 Scoliosis

11 Terminal cancers (palliative care) 12 Ischemic disease (myocardial infarction) 13 Behavioral disorders

36 Depression

14 Congenital heart disease (operable) 15 Neural tube defects

16 Cleft lip/ palate

37 Alcohol/drug dependence

2007

2010

50 Epilepsy (program to improve management in children) 51 Eye trauma

66 Prevention of chronic renal disease

52 Detached retina

38 Psychosis (severe 53 Strabismus psychiatric (children under disorders) 9 years) 39 Bronchial 54 Acute respiratory asthma infections (children under 15 years) 40 Chronic 55 Comprehensive obstructive oral health pulmonary disease 56 Dental emergencies

Source: Misoni and Solimano (2010).

Chile’s health care delivery system While today’s Chile’s health care delivery system is much better than what it was at the beginning of the democratic transition, there are still a number of critical issues to address including the high cost of medicines, the still low per capita government spending, and the inequities embedded in the AUGE program. Today people in Chile pay more for health than in any other OECD country. Data for 2013 indicates that a total 4.6 percent of the average Chilean family’s budget is spent on health as compared with 2.86 percent for the average OECD countries. According to former Health Minister Jaime Mañalich, “[Chile has] an imperfect insurance system . . . and the fundamental reason for this huge out-of-pocket spending is pharmaceuticals.” Camilo Cid, a public health expert, has argued that “expenditure on medical drugs in Chile grew rapidly by 12.1 percent between 2009 and 2011,” which makes the country a very attractive market to the pharmaceutical industry (Druttman, 2015). Other data indicates that over 80,000 households spend over 40 percent of their income in health. Regarding per capita spending Chile is in the bottom third of the OECD countries. In 2011, Chile spent US$1,568 per capita on health, while the OECD average was US$3,322. On the positive side, life expectancy has risen.While a child born in Chile in 1970 had a life expectancy of 62 years, a child born in 2011 has a life expectancy of 80 years. However, the same OECD report showed that Chile was in the top five countries with the highest prevalence of diabetes, 145

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with 9.8 percent of the population between 20 and 79 affected by this devastating disease (the OECD average is 6.9%). High prevalence of diabetes is linked to high obesity levels, with 31 percent of the male population obese and 19 percent of the female population obese, placing Chile sixth highest among OECD countries (Druttman, 2015). Both conditions have a massive impact on health spending. Lastly, while AUGE has eliminated the labor market inequities of the past, it has generated a disease/diagnosis–based inequity because those affected by diseases included in the AUGE plan are entitled to the plan’s guarantees and those affected by other diseases are not. Moreover, the medical community and others have been very critical of the criteria used to select the illnesses and the pre-established treatment formulas (Misoni and Solimano, 2010) because while they reduce costs they also reduce the quality and quantity of the service.

The pension system This section outlines the 1980 reform, its socioeconomic impact and the role of the state and the market in the provision of pensions.

The 1980 reform It is clear that Chile’s social security system required major reforms given its high cost, many inequities and the insufficiency of pensions. What is also clear is that the system did not need the kind of reform implemented by the Pinochet regime. As we have argued elsewhere, the social security reform was a by-product of the power and the ideology of General Pinochet’s economic advisors, the Chicago Boys. In the pension area the neoliberal ideology, as applied by the reform’s author Minister José Piñera, argued that instead of creating a more egalitarian society the PAYG approach had created a system full of privileges and inequalities. Instead, the market-oriented approach eliminated the old institutions and created a system based on the private administration of individual accounts and the elimination of the state and the employer’s portion of the social security tax (Borzutzky, 2002). The transference of the administration to the private sector involved the creation of a new type of enterprise: The Administradoras de Fondos de Pensiones (Pension Fund Managing Corporations), or AFP. The AFP is a for-profit entity that charges a commission for the administration of the individual accounts. The accounts are the result of a 10 percent contribution paid only by the worker. Pensions, in turn, are provided either directly by the AFP, indirectly through an annuity bought from an insurance company with the funds accumulated in the account, or through a combination of the two. In the case of disability and survivors’ pensions, the benefit is paid directly by the AFP. In the first case, the pension is determined annually by the AFP on the bases of the life expectancy of the affiliate and the rate of return of the capital. In the case of the annuity, the funds are permanently transferred to an insurance company, and the company determines the amount of the pension, as well as funeral and survivors benefits, if this is what the retiree wants (AAFP, 2000). The new system was compulsory for all workers who joined the workforce after December of 1981, while those already employed could choose between the old and the new systems. It is quite ironic that the military and the police retained their state-financed systems. From an administrative standpoint, the system entailed the disappearance of the old funds and the creation of a unified administrative system under the Instituto de Normalización Previsional. The Instituto administers the Bono de Reconocimiento, or Recognition Bond, which represents the number of years that the insured contributed to the old system. These monies are transferred to the AFP at the time of retirement. 146

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Impact of the reform: financing, administrative costs and state responsibility The pension reform enacted by the Pinochet regime has defined the nature of retirement in Chile for the last 30 years and it will continue to do so for the foreseeable future. However, not all Chileans have been affected in the same manner. The individual pension funds, or savings accounts, are financed by a 10 percent wage tax paid only by employees, because employers and the state are exempt from contributing to workers’ pensions. In addition, workers are permitted to make additional voluntary contributions above the mandatory 10 percent, which are administered in separate funds established by the AFPs, with the sole purpose of managing voluntary contributions (Decree-Law 3500). From an administrative standpoint, the system entailed the disappearance of the old funds and the creation of a unified administrative system under the Instituto de Normalización Previsional, renamed Instituto de Prevision Social (IPS) in 2008. The IPS administers the Bono de Reconocimiento, or Recognition Bond, which represents the amount of money accumulated in the PAYG system. These monies are transferred to the individual account at the time of retirement. Other administrative units include the Superintendencia de Administradoras de Fondos de Pensiones, known today as Superintendencia de Pensiones, which is in charge of licensing, supervising, regulating and dissolving AFPs. Pensions are provided either directly by the AFP through programmed withdrawals, indirectly through an annuity bought from an insurance company with the funds accumulated in the account, or through a combination of the two. When the annuity option is chosen the accumulated funds are permanently transferred to an insurance company which determines the amount of the pension, as well as funeral and survivors’ benefits. The annuity must be inflationprotected and provide for survivors’ benefits. When a programmed withdrawal is chosen, the pension is determined annually by the AFP on the basis of the life expectancy of the affiliate and the rate of return on assets. If the retiree exhausts his or her account assets, he or she qualifies for a state-provided Minimum Pension (AAFP, 2000: 1–2). In the case of disability and survivors’ pensions, the benefit is paid directly by the AFP. The state acquired the obligation to provide Minimum Pensions to those in the private pension system who did not have enough money saved to have a pension equal to the statutory minimum. To supplement and complement the pension system, the 1981 reform established a means-tested and parsimonious Welfare Pension for those who are below the poverty level and had not contributed to the system. The privatization of pensions affected the entire society as well as the state, but any benefits arising from the reform came to be distributed in a highly unequal manner. We now have more than 30 years of data on the socio-economic effects of pension privatization and this data shows that the FF, DC system is expensive, concentrates income in the hands of the Pension Fund Administrators, generates huge profits for the AFPs, is exclusionary and discriminates against women (Borzutzky, 2002, 2008, 2012). Moreover, fiscal responsibilities for the Minimum Pensions and Bonos de Reconocimiento have created a persistent budget deficit which has been financed by taxes paid by all Chileans. The reform promised an efficient pension market in which management charges, fees and commissions would be determined by competition. However this promise has not been realized. A World Bank report estimated that pension fund administrators have retained between a quarter to a third of workers’ contributions in the form of commissions, insurance and other administrative fees since the inception of the system (Gill et al., 2004). Privatization of pensions has led to a massive concentration of income in the hands of the AFPs, while the profitability of 147

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the companies in the early years of the 21st century was estimated to be over 50 percent (Gill, 2004). Additionally, the rate of profits of the industry has at times been double than the rate of profit of any other industry in the country. After 1998 the rate of profits of the AFPs reached annual rate of 53 percent (Valdés and Marinovic, 2005). The AFPs administrative charges are 89 percent more expensive than what banks or private stockbrokers charge (Valdés, 1999). The question of high profits is compounded by the lack of market competition and the fact that since its inception the number of AFPs has been reduced to five and that the three largest AFPs manage 86 percent of all the accounts (Mesa-Lago, 2014: 6). We should also note that the management charges in the new privatized retirement system have operated in a regressive way and penalized the poorest. For instance, for an insured person with an income of about US$1,609, the administrative costs fluctuates between 25.6 and 37.9 percent of the deposit; while the cost for an insured person with an income of US$1,300 fluctuates between 24.1 and 30.2 percent of the deposit (SAFP, 1998: 28–32).The FF system has also had a very powerful effect on the AFPs’ owners due to the massive transference of funds from the public to the private sector of the economy. By March of 2003, the combined amount of capital accumulated in the hands of the AFPs amounted to 55.7 percent of GDP (SAFP, 2003: 5). According to another study of Chile’s privately administered retirement system, AFP management charges have been up to two-thirds higher than the fees imposed by the country’s banks for administering savings and on-time accounts (Hyde et al., 2006). There has been considerable discussion about the extent of the coverage provided by the FF, DC system since its inception. Data for 2003 shows a marked decline in coverage, because the AFP system was covering only 52.5 percent of the economically active population (EAP), with another 2.7 percent still enrolled in the common fund system. By 2007, about 50 percent of the population was excluded from the system, and a large portion of those who contributed were not able to save enough to obtain the equivalent to a minimum pension, forcing the state to fund those pensions through its Minimum Pension program. Moreover, the pension system had left out a large portion of the population including the self-employed and all those Chileans that have either been unemployed, or had part-time employment during their active life. Additionally, the privately administered pension system is seen as discriminating openly against women because women live longer than men, their salaries are about 30 percent lower than the salaries of their male counterparts, and they contribute less because of child rearing and other family responsibilities (Arenas de Mesa and Montecinos, 1996). As a result, the data shows a dismal situation in terms of the number of female contributors, the number of women accessing FF pensions, and the replacement ratio of their pensions. By 2007, only 39 percent of women (versus 61 percent of men) were actively contributing to a pension and only 54 percent of all retirees were women as opposed to 69 percent of men (Mesa-Lago, 2014: 6).While the question of replacement ratios is complex and it will be addressed later, it is important to note that the replacement ratio for women is about 35 percent while the replacement ratio for men is about 46 percent (Mesa-Lago, 2014: 6). There is substantial evidence to suggest that the investment performance of Chile’s fund managers has been suboptimal. Much of the evidence around net returns – which are a function of investment returns and management charges – suggests that the performance of the AFPs during the first two decades of the “private” system was rather poor. When returns are estimated in this way, they are “more than halved from what has been reported by the AFPs and conservative pundits” (Leiva, 2006: 7). Acuña and Iglesias (2001) on their part argue that the AFPs generated an average net return of 5.1 percent during the first two decades; while Kay (2003) estimates average net returns of 0.3 percent for the period 1982 to 1986, and 2.1 for 1991 to 1995. 148

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Contrary to the expectations created by the program’s framers, the value of the pensions offered by the FF, DC model has not changed dramatically either. In 2001, the value of an average FF pension was 12 percent higher than the value of a pension provided by the common fund system, but in the case of disability pensions the pension provided by the common fund system was 23 percent higher than the pension provided by the FF system (SAFP, 2001: 199). A comparative 2014 study done by the Instituto Libertad y Desarrollo, a think tank, which included 976,000 retirees concludes that the AFPs pay an average old-age pension of about US$354, while the state through the Instituto de Prevision Social in charge of paying the pensions of those who remained in the PAYG system pay an average old-age pension of US$390. It is important to keep in mind that while the AFP affiliates’ total contribution liability is 13 percent of the wages (basic 10 percent of the wages plus additional contributions for special programs), the contribution made in the public system amounts to 20.7 percent (El Mercurio, 2014a). What has been the pension system’s impact on inequality and income distribution? In 2005 a government report established that “the distribution of retirement income is much more unequal than the distribution of active life income for the same cohort . . .The same can be said for the level of minimum pension guaranteed by the state” (Reyes and Pino, 2006: 12). Thus, the Gini index for retirement income is higher than the actual Gini index of about 0.52. The same study also shows that Minimum Pensions, which were about US$130 per month at the time of the study, do not have a large distributive effect (Reyes and Pino, 2006). A 2013 OECD pension study provides a progressivity index of pensions according to which a perfectly progressive system gets a score of a 100, while a system that does not have any impact on progressivity gets a 0 – Chile’s index is 27.9 (OECD, 2013). The private pension system has also adversely impacted the state. Despite of the neoliberal rhetoric, the FF, DC system did not eliminate but simply changed the role of the state. In practice, the state continues to have a large number of pension responsibilities because it pays the pensions of those who stayed in the Common Fund system; pays the Recognition Bond at the time of retirement of those who began in the Common Fund system and then transferred to the FF system; and pays the Minimum and Welfare Pensions. The two most expensive fiscal expenditures are the Recognition Bonds and Minimum Pensions and they have resulted in a constant budget deficit.

Reforms since the transition to democracy The post-1990 governments have been committed to maintaining the pension scheme designed by the Pinochet regime and only made modifications to strengthen the market approach to pensions and increase the state’s role in maintaining the private pension edifice built during the Pinochet years. This section discusses marginal modifications such as the introduction of Multifunds and Voluntary Contributions and a more substantial reform in 2008.

Voluntary contributions and multifunds According to legislation adopted in 2001, workers both in the private and in the public pension systems are allowed to set up voluntary retirement savings accounts. Their goal is to stimulate private savings and augment the pension’s value as well as the replacement rate. These accounts were also aimed at reducing government’s involvement in the system via minimum pensions in hopes of injecting a new dynamism in the capital markets and increasing pension values. The contributions are non-taxable (taxes are paid at the time of retirement) and the funds can be 149

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deposited either in an AFP, in a bank, a mutual fund, a life insurance company or an investment fund. This new modality benefits mostly high-income groups. All voluntary contributions and accounts can be combined with the mandatory individual account at the time of retirement. New legislation enacted in June of 2002 allowed the AFPs to establish at least five different types of pension funds. The critical difference between them is the proportion of the deposit invested in instruments of “variable income” (Instrumentos de renta variable), which are riskier but have the potential to generate a larger return. The goal here was to provide the insured with a variety of investment options and with a higher degree of participation in pension decisions. However, those who are over 55 years old must stay with the traditional (or type one) plan in order to secure their investments. Each of the funds is regulated in terms of the proportion of investments going into high risk instruments and each type of fund must pay a minimum interest (Borzutzky, 2011). Finally, additional reforms permit the investment of funds abroad and established new regulations in this area.

The 2008 pension reform Given the many problems generated by the private pension scheme and outlined above, the Bachelet administration (2006–2010) was faced with a multitude of pension-related demands including the expansion of the state’s role to support women, the young and the poor. Thus, the overall goals of the 2008 reform were to move towards the universalization of benefits, augment the replacement ratio and reduce the variability of the replacement rate due to differences in the density of contributions. The reform also aimed at reducing old-age poverty by strengthening both the Welfare and Minimum Pensions and proposing the creation of a strong and well-integrated Solidarity Pillar. The goals of the Solidarity Pillar were to protect and integrate low-income groups into the pension system, provide mechanisms to increase the density of contributions, develop new approaches geared to increase competition among the AFPs, increase the funds’ rates of return, increase transparency in the management of the pension funds, and strengthen the Voluntary Pillar by providing new benefits to those who can have additional savings (CRP: 98–101). The most important accomplishment of the 2008 legislation (Law 20255) was to guarantee a Basic Solidarity Pension (PBS) to all Chileans over 65 years old who had never contributed to the pension system. By 2013 the value of the PBS amounted to US$160 (Subsecretaría de Previsión Social, Pensión Básica Solidaria).The state also guarantees a Supplementary Contribution (Aporte Previsional Solidario, APS) to those who have insufficient contributions to finance their retirement benefits. To qualify for the state contribution the affiliate must have made contributions to an AFP, but the value of the accumulated funds should generate a pension that is less than US$520 (Superintendencia de Pensions, Aporte Previsional Solidario de Vejez). This benefit is calculated on the basis of accumulated savings and is expected to provide pensions equivalent to 60 percent of those in the lowest income groups (Reforma Previsional Gobierno de Chile).The government also provides a Basic Disability Pension to those covered by the PBS. In brief, the state acquired a number of new pension responsibilities and the most important of those is the PBS that was designed to reduce old-age poverty by expanding coverage and providing a pension to workers that for a variety of reasons had never established a pension account in an AFP. Most favored by the PBS are workers who have been in and out of the labor market, temporary and independent workers, and women. It is estimated that 60 percent of the solidarity pensions will be devoted to women. Those who started to save, but did not accumulate sufficient assets, receive the APS and the state also provides disability pensions to all those covered by the PBS and the APS. 150

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A critical feature of the reform is the state obligation to augment the value of women’s pensions by depositing 18 months of contributions per child. The state contribution is based on a minimum salary. Although the money is not deposited into the account until the woman turns 65, the contribution begins to generate interests from the moment the child is born. The goal here was to increase women’s pensions and to reduce the existing pension gender gap. The architects of the 2008 reform argued that as citizens, women are entitled to the same pension benefits as men, and that the state is obligated to rectify inequalities that result from gender differentials in labor force participation (CRP: 118–120). Regarding independent workers, the legislation introduced a 10-year transitional period to integrate them into the pension system. By the end of this period the independent workers should be contributing and receiving the same benefits as dependent workers. The entrance of new independent workers into the system is regulated by the state through a “bidding system,” according to which every year the state groups those interested in joining the pension scheme into “packets” and the AFPs have to offer formal bids to capture the packet. In order to encourage expansion of the pension system and young workers contributions, the government also subsidizes the pensions of workers between 18 and 35 years of age with an income that is less than 1.5 times of the minimum salary. The 2008 law also favors middle-income groups through the creation of a system of Voluntary Pension Savings (Ahorro Previsional Voluntario).

Pensions in Chile today In 1973 Chile’s social security system covered about 73 percent of the economically active population (EAP) and by late 2014 the combined fully funded pension scheme and the remnants of the old PAYG system included in theory the same 73 percent of the EAP. A total of 9.7 million Chileans are registered in one of the six AFPs, but only 4.9 million or about 34 percent of the population are active contributors and will receive a pension. The total savings accumulated in the hands of the pension fund administrators amounted to US$163,196 million or about 69 percent of the Chilean GDP in 2013. The data also shows that the AFP system has provided pensions to 998,457 retirees with an average value of about US$400 monthly (El Mercurio, 2014b). The data also shows that on average men make deposits for about 25 years out of a 45-year working life whereas women register about 15 years of deposits out of a 35-year work life. As a result, the replacement rates range from 11 to 55 percent of the wages for men and from 8 to 40 percent for women. A recent study estimates that more than half of retirees have pensions that are less than 48 percent of the average wage received in the last 10 years of active life (La Tercera, 2014). By comparison, average replacement rates in OECD countries amount to 65.8 percent. Persistent problems have led the newly re-elected President Bachelet to name yet another commission to reform the system. The Bravo Commission was scheduled to present its report to President Bachelet in January of 2015, but the report has been postponed until the middle of 2015. It is expected that right wing politicians will intensely oppose any reforms of the system that could include the creation of a state-owned AFP or an employer contribution.

Unemployment insurance One of the most important additions to Chile’s social welfare program has been the introduction of an Unemployment Insurance program in 2002.The insurance is based on a system of tripartite contributions which combine individual accounts designed specifically for this purpose with a National Solidarity Fund. The system covers all workers except domestic workers and 151

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minors. The program provides automatic coverage for all workers who join the labor force after the enactment of the law in 2002; it is optional for those who are already employed.The fund is formed with a 0.6 percent tax paid by the worker, a 2.4 percent tax paid by the employer and a state contribution of about US$9 million per year. The funds go to two different accounts: the worker’s entire contribution plus 1.6 percent paid by the employer forms the worker’s individual account, and the remaining 0.8 percent paid by the employer plus an annual state contribution of US$9.4 million forms a Solidarity Fund. The law distinguishes two types of benefits: The Individual Account is used to pay benefits in case of unemployment, regardless of the reason. The benefit paid depends on the amount accumulated in the individual account. The law requires a minimum of a year of contributions. The Unemployment Insurance program is administered by a private, for-profit corporation dedicated only to this task and the administrator is entitled to charge a commission for the management of the funds. Ultimately, a conglomerate of AFPs won the bid and will administer the system for 10 years.The same institution, known as the Unemployment Insurance Administrator Corporation (Sociedad Administradora del Seguro de Cesantía), has the obligation of paying the benefits. Because the funds belong to the insured, unused funds at the time of the insured’s death are part of his estate.

Conclusions This chapter has presented an analysis of the evolution of Chile’s social welfare system with an emphasis on the role of the state and the market in the provision of health care benefits and pensions. From our standpoint, the pension situation is quite clear. The Pinochet regime transformed Chile’s social security into a compulsory, private pension system with a subsidiary but substantial role for the state. The state supplements the market through the provision of Minimum and Welfare pensions, as well as the provision of pensions for the military, the police and those who opted to stay in the Common Fund system. The Minimum and Welfare pensions are there to maintain a veneer of social/state commitment to the pensions and to compensate for the failures of the FF, DC scheme. Moreover, since 2008 the state has increased its obligation through the creation of the Basic Solidarity Pension and the support it provides to the poor, women and young workers. There is no doubt that the pension system has generated substantial profits for the administrators and meager pensions for a majority of the Chileans. There is little doubt either that policies enacted since the mid-1990s have strengthened the role of the market through the introduction of new savings mechanisms administered by the private sector and geared to increasing the savings among the middle- and upper-income groups while reinforcing the existing socioeconomic inequalities. However, the FF, DC has failed because it is only providing pensions for about one-third of the population and because the amount received by the insured is insufficient. In the health care area, the picture is more complex.The post-Pinochet governments found a sector that was starving for resources and for a serious and coherent reform.The Lagos administration’s AUGE program certainly provided the framework for a coherent reform, but although the plan was designed to eliminate old inequities, it has created new ones. In this system the critical distinction is whether the disease is or is not covered by AUGE.The future of health care hinges on the willingness of the public sector to increase and not decrease its financial commitment to health care, expand the number of diseases covered by AUGE and further regulate the private sector. 152

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In conclusion, those who protect the market and those who are interested in the establishment of a true welfare system will continue this never-ending struggle while Chileans at the bottom of the income structure continue to expect more generous benefits and pensions.

References AAFP, Asociación de Administradoras de Fondos de Pensiones (2000), Serie de Estudios, No 8, June, Santiago de Chile, pp. 1–2. Acuña, R. and Iglesias, A. (2001), Chile’s Pension Reform after 20 Years, Working Paper, No. 0129, World Bank, Washington, DC. Arenas de Mesa, A. and Montecinos, V. (1996), The Privatization of Social Security and Women’s Welfare: Gender Effects of the Chilean Reform, Latin American Research Review,Vol. 34, pp. 37–38. Artaza, O. (2003), Mensaje del Ministro de Salud a los Médicos de Chile, http://www.emol.com. Borzutzky, S. (2002), Vital Connections: Politics, Social Security, and Inequality in Chile, University of Notre Dame Press: Notre Dame, IN. ——— (2006), Cooperation and Confrontation between the State and the Market?: Social Security and Health Policies, in S. Borzutzky and L. H. Oppenhein, After Pinochet:The Chilean Road to Democracy and the Market, University of Florida Press: Gainesville, pp. 142–167. ——— (2008), Social Security Privatization and Economic Growth, in J. Midgley and K.-L. Tang (eds.), Social Security, the Economy and Development, Palgrave-Macmillan: London. ——— (2011), Reforming the Reform in the Special Issue, Journal of Policy Practice, Vol. 11, No. 1–2, pp. 77–91. Cartin, B. (1999), The Effectiveness of the Reform, in M. Amparo Cruz-Saco and C. Mesa-Lago (eds.), Do Options Exist? The Reform of Pensions and Health Care Systems in Latin America, University of Pittsburgh Press: Pittsburgh, PA. Druttman, B. (2015), Poor Ratings for Chile in Health and Pension’s Systems According to OECD, http:// santiagotimes.cl. Duran,V. (2003), Médicos Critican Baja Cobertura Mental del Auge, El Mercurio, February 4, http://www. emol.com. El Mercurio (2014a), 700 Mil Personas Siguen Recibiendo su Jubilación del IPS: Pensiones del Sistema Antiguo Son 45 percent Más Bajas que las que Entregan las AFP, July 6, http://impresa.elmercurio.com. ——— (2014b), Número de Nuevos Pensionados por Año Crecerá Más Del Doble entre 2015 y 2020, July 23, http://www.social-protection.org. Gill, I.; Packard, T., and Yermo, J. (2004), Keeping the Promise of Old-Age Income Security in Latin America: A Regional Study of Social Security Reform, World Bank: Washington, DC. ——— (2005), Keeping the Promise of Social Security in Latin America, Washington, DC: World Bank. Hyde, M.; Dixon, J., and Drover, G. (2006), The Privatization of Mandatory Retirement Income Protection: International Perspectives, Edwin Mellen: Lewiston, NY. Kay, S. J. (2003), State Capacity and Pensions, paper presented at the LASA XXIV International Congress, Dallas, TX, March 27–29. La Tercera (2014), Pensiones: Los Cambios que Estudia la Comisión Bravo, October 26, http://www.later cera.com. Leiva, F. (2006), Chile’s Privatized Social Security System: Behind the Free Market Hype, A Scam, Connections, May/June, pp. 1–13. Merino, R. (2002), Desarrollo Histórico y Visión Futura de la Salud in Chile, in Rafael Caviedes and Rafael Merino (eds.), Síntomas del Sistema de Salud Chileno, su Diagnóstico y Tratamiento, Ciedess: Santiago de Chile. Mesa-Lago, C. (1976), Social Security in Latin America: Pressure Groups, Stratification and Inequality, University of Pittsburgh Press, Pittsburgh, PA. ——— (2014), Reversing Pension Privatization:The Experience of Argentina, Bolivia, Chile and Hungary, ESS Working Paper, No. 44, International labor Office, Geneva, Switzerland. 153

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Misoni, E. and Solimano, G. (2010), Towards Universal Health Coverage: The Chilean Experience, World Health Report, Background Paper, No 4, http://www.who.org. OECD (2013), Pensions at a Glance, http://www.oecd.org. Reyes, G. and Pino, F. (2006), Income Inequality in an Individual Capitalization Pension System: The Case of Chile, April 2005, 1, http://www.economiaynegocios.uahurtado.cl/pdf/seminarios/reyes.pdf. SAFP, Superintendencia de Administradoras de Fondos de Pensiones (1998), Boletín Estadístico Mensual, Vol. 148, Santiago de Chile. ——— (2001), Boletín Estadístico Mensual,Vol. 199, Santiago de Chile. ——— (2003), Estadísticas Principales, SAFP: Santiago de Chile. TE, Trading Economics (2015), http://www.tradingeconomics.com/chile. Valdés, S. (1999), Las Comisiones de las AFPs son Caras o Baratas? Estudios Públicos, No. 73, Santiago de Chile. Valdés, S. and Marinovic, I. (2005), Contabilidad Regulatoria para las AFP 1993–2003, Working Paper, No. 279, Instituto de Economía Universidad Cato˙lica, Santiago de Chile. WB, World Bank (2015), World Development Indicators, http://data.worldbank.org.

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9 The Brazilian welfare state system With special reference to the outcomes and performance of the welfare state system Christian Aspalter

The Brazilian welfare state system as it is today exhibits some of the worst income inequality and asset inequality in the world. It can be rightfully described as “an ill-fare state that takes from the poor to give to the rich and the well-to-do” (Loundo, 2005: 292). Despite the relative high level of overall state expenditures on social affairs, “most of the social programs are badly focused or ineffective” (Farias, 2003: 43). While social expenditures are focusing on government employees (especially in pensions), the particular type of conditional cash transfer system applied in Brazil (the NET+AMT type) is diagnosed having poverty-increasing side effects over time, and only spends a marginal share of the national welfare state budget (Aspalter, 2016). Despite prior “real-typical” classifications of the Brazilian welfare state system (besides that of Costa Rica), as representing some kind of social democratic or universal model (e.g. Huber, 1996; Suter and Budowski, 2001; Huber and Stephens, 2012; Martinez Franzoni and SánchezAncochea, 2012), the reality on the ground – that is, the social policies applied and the outcomes thereof – tell quite a different story. Some successes have been achieved in terms of universalization of social services, particularly health care in Brazil, but social policies towards universalization of social rights, services and benefits did not see continuation of that effort. On the contrary, recent administrations, especially the Collor de Mello administration and the Cardoso administration in Brazil (Loundo, 2005), worked more or less openly and energetically against any real empowerment approach in social policy and any extension (particularly universal extension) of the implementation of social rights, social services and benefits and, on top. They also actively dismantled corporatist and civil society institutions that worked for the very same goal (extension and universalization of social rights, benefits and services), and particularly cut welfare budgets that would achieve progressive redistribution of resources (from the rich to the poor), and kept others that worked in favor of regressive redistribution from the general public to privileged special interest groups (see Novy, 2001; Suter and Budowski, 2001).

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As a high-level insider from the Brazilian health administration and key social policy expert on the issue has put it: the last two decades have been characterized by lack of continuity generated by the instability of administrative structure, which have been frequently created, transformed or eliminated in the governmental areas responsible for social security activities. (Farias, 2003: 39) The approved laws have not met the necessary political will and the appropriate administrative resources to achieve their goals. (Farias, 2003: 38) In spite of the Constitutional guidelines, the system of social protection retained its characteristic of exclusion. The several social insurance benefits instituted by the Constitution were fully regulated in the first years after their creation, without loss of traditional privileges, like the retirements with special legislation for some professional categories with a high influence. On the other hand, the social assistance benefits for poor people without political pressure capacity faced serious difficulties to be instituted . . . while the benefits linked to the maintenance of formal work became a reality, the universal right to health remains seriously compromised and the assistance to families, children, adolescents, [elder persons, and persons with a handicap] . . . remains influenced by political use, paternalism and lack of social integration . . . the social assistance has been relegated to a position of secondary importance. (Farias, 2003: 37–38, emphasis added) According to the Constitution of 1988, the Brazilian health care system is based on the principles of universalism, equality and the integration of activities. But, soon after its conception, the resistance against the new concept of universal social rights in health care delivery organized itself, and gained and executed tremendous political power opposing this new welfare state paradigm (see Novy, 2001: 88). The national bureaucracy of social insurance, which the Constitution mandated to be dissolved, opposed this new paradigm in health care policy and opposed the newly erected Unified Health Care System (SUS, Sistema Unificado de Saúde). At the same time, while not cutting social rights per se, the administration (both in the social security agencies and at the national level) cut the resources that were available for the welfare state to spend. On the one hand, the forces that were in favor of private health insurance formed a key support group for the newly elected President Fernando Collor de Mello in 1991, and got as a reward strong support in form of tax exemptions (a different form of government subsidies). On the other hand, a great number of social emergency funds have been implemented, which constitute a great deal the available funds for the core institutions of the Brazilian welfare state (Novy, 2001: 88–89). In reality, the stipulation in the Constitution of Brazil that the government has the duty to implement a universal social security system has turned into a “dead law” as the government is strongly supporting private health care provision and two private pension systems (covering individual accounts and company pension plans), especially since the mid-1990s (see McGuire, 2001; Novy, 2001: 87, 89; see GB, 2009; Mussi and Pinto, 2014; Leopoldi, 2015). Both President Fernando Collor de Mello and President Fernando Henrique Cardoso (who was a Social Democrat and an astounding former supporter of the dependency theory, but pursued a great deal of neoliberal policy objectives right at the onset of his presidency) supported 156

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the idea of a minimal state, and continuously dismantled state power in areas most related to social welfare provision. They did so by disengaging the state from its main regulatory and productive function, [this meant that] a historical process was about to begin in Brazil of radical revision of over 60 years of state intervention as a basic dimension of the project of social and economic development. (Loundo, 2005: 274) This policy stance has not been abolished since. With certain exceptions, particular increases in minimum wages, the overall neoliberal strategy in social welfare and social security provision was continued and developed further under President Luiz Inácio Lula da Silva and President Dilma Vana Rousseff, while at the same time the policies of supporting national industries and industrial policies have strengthened under the reign of these two presidents (Arbix and Martin, 2010; da Fonseca Menezes, Brait-Poplawski and Santarelli Roversi, 2012; Lavinas, 2012, 2013; Ban, 2013). This chapter underlines that Brazil is, in fact, an ordinary member of the “ideal-typical” Latin American Welfare Regime, what Aspalter (2011) identified as the Anti-welfare Conservative Welfare Regime. There is deviation, and that is fully accounted for – and wanted – by the very purpose of the method of comparing ideal types, as opposed to the method of comparing real types (Aspalter, 2012a). The sugar coating of “formal” (legally instituted, only partially implemented, while being hampered and circumvented in many ways) universalism in the case of Brazil makes the case of Brazil indeed an interesting member, but still an ordinary member, of the ideal-typical Anti-welfare Conservative Welfare Regime in Latin America (Table 9.1). The author found strong support from numerous researchers supporting the idea of conservatism as a lead philosophy in welfare politics, which is mixed with the philosophy and strategy of neoliberalism. Hence, the term Anti-welfare Conservative Welfare Regime (Aspalter, 2011) turns out to be rather fitting, that is capturing a great deal of especially recent research findings in this area (see e.g. Draibe et al., 1995; Arbix and Martin, 2010; Fleury, 2011; Simionatto and Luza, 2011; Lavina, 2012, 2013; Mussi and Pinto, 2014; Cortes, 2015; Leopoldi, 2015).

Main characteristics of the Brazilian welfare state system Social insurance The general social insurance system (the RGPS, Regime Gerald de Previdência Social) is being administered by the National Social Security Institute (the INSS, Instituto Nacional de Seguro Social). This social insurance system mainly caters to the need for old-age income security, but features also maternity benefits, family allowances and income replacement benefits in case of illness, accidents and imprisonment. It covers private employees, domestic servants, temporary workers, entrepreneurs, rural workers in a family company, and optionally also students and housewives and so forth. (GB, 2009: 32, 41–43). There is still an urban-rural divide in the workings of the Brazilian welfare state system, for example when it comes to the retirement age. Men in cities can retire at age 65, women at age 60, but in rural areas the retirement ages are 60 and 55 years respectively. A second option to retire is based on the total length of contribution time, which is 35 years for men and 30 years for women. At age 70, both women and men are being forced to go into retirement (GB, 2009: 13–14). Civil servants in Brazil are treated especially favorably, in the tradition of Bismarckian social security systems (see e.g. Mesa-Lago, 2008, 2013; Lavinas, 2013). The special social insurance 157

Performative Social Rights

Universal Social Rights Universal social security and welfare services

Strong Weak Strong Weak Medium Medium Low e.g. Germany, Austria, Netherlands, Belgium, France, Switzerland, Portugal, Spain, Italy, Poland, Czech Rep., Hungary, Slovenia

Strong Weak Weak Strong High

Low

High

Sweden, Norway, Finland, Denmark, Iceland

Bismarckian social insurance, NGO-based welfare services

Christian Democratic

Social Democratic

Christian Democratic WR in Continental Europe

US, Australia, New Zealand, Canada, UK

High

High

Weak Strong Weak Strong Low

Liberal/ Neoliberal Clientelistic Social Rights Asset- and meanstesting, limited social insurance, companybased welfare services

Liberal WR in Anglo-Saxon countries

e.g. Mainland China, Hong Kong, South Korea, Japan, Taiwan, Thailand, Malaysia, Singapore, Indonesia

Medium

Medium

Productive Social Rights Universal social investment in education, health care, housing; Bismarckian social insurance (being universalized over time) and/ or provident funds Increasing Decreasing Strong Weak Medium-low

Pro-Welfare Conservative

Pro-Welfare Conservative WR in East Asia

e.g. Argentina, Bolivia, Brazil, Chile, Colombia, El Salvador, Guatemala, Mexico, Peru, Uruguay

Medium

Extremely High

Regulative Social Rights Mix of Bismarckian insurance systems and mandatory private insurance systems, and some concentration on NET+AMT–based CCT programs Decreasing Increasing Strong Weak Medium-low (decreasing)

Anti-welfare Conservative

Anti-welfare Conservative WR in Latin America

Notes: WR = welfare regime; findings on are based on Esping-Andersen (1987, 1990, 1998), Aspalter (2001a, 2001b, 2001c, 2002b, 2002c, 2005, 2006, 2011, 2012a, 2016), Aspalter, Kim and Park (2009), Kersbergen (1994, 1995), Huber et al. (1993), Huber and Stephens (1999, 2001), Abrahamson (2003, 2008), Lavinas (2012, 2013), Calvo, Bertranou and Bertranou (2010), Mesa-Lago (1997, 2003, 2008, 2013), Loundo (2005), Farias (2003), Jäger (2001), Suter and Budowski (2001), Novy (2001).

Degree of decommodification Degree of stratification Degree of individualization Countries/regions

Emphasis on: State/Market/ Family/Individual

Welfare Mix

Main Welfare Ideology Social Rights

Social Democratic WR in Scandinavia

Table 9.1 Comparing the first five “ideal-typical” welfare regimes

The Brazilian welfare state system

system (the RPPS, Regime Próprio da Previdência Social) caters to civil servants. On the contrary to the general social insurance system, here the last salary of the civil servant is taken as the base for the pension formula, whereas it is the average salary for members of the general social insurance system, which then is also, since 1999, subject to a combined multiplier (called the “welfare factor”) which is, as usual, designed to curb benefits, and hence takes into account (1) general life expectancy, (2) the overall contribution time and (3) the age of the insured at the time of retirement (GB, 2009: 16, 33). In 2003, caps have been introduced for pensions of civil servants, to slowly address the unequal treatment of civil servants and the public that is insured under the general social insurance plan. Apart from these two public social security systems that focus mainly on pension security, there are two more private pension systems. This dual approach to apply to old-age income security reflects the overall logic and design of Latin American welfare state systems (see MesaLago, 2003, 2008, 2013; Aspalter, 2011). These two systems are designed and benefit particularly the rich and well-to-do Brazilians. They are income tax exempt, hence further worsening the imbalance of income distribution caused by the Brazilian tax system, where the poor pay more taxes than the rich and the betteroff middle classes. This is yet another important Rosetta stone in the explanation why Brazil’s income and asset distribution is (still) among the worst in the Latin American region (far away from any understanding of a social democratic welfare regime, almost on the opposite end of the spectrum). The two systems are the Previdência Complementar Fechada (the Closed System of Private Old-Age Income Security) established in 1977 and the Previdência Privada Complementar Aberta (the Open System of Private Old-Age Income Security) established in 1994. Previdência Complementar Fechada is being extended (since 2001) by allowing not only large companies but now also professional categories and civil servants to join this plan. The Previdência Complementar Fechada is supervised by the Secretary for Complementary Social Security in the Ministry of Social Security. The Previdência Privada Complementar Aberta, on the contrary, is controlled by the Superintendency of Insurance and Private Pensions of the Ministry of Finance. The Previdência Privada Complementar Aberta was part of the Real Plan to stabilize the currency and economy of Brazil (to get the inflation under control), and has become the most profitable and important business of the Brazilian banking and insurance sector, involving – in 2006 – over 7,8 million individual plans and 100,000 corporate pension plans, with total assets of R$96.6 billion. It has become central to the plans to support state companies and large public infrastructural projects (Leopoldi, 2015). Its role in the overall economic development strategy of the country, hence, can be compared to that of the Central Provident Fund (CPF) in Singapore (Low and Aw, 1997; Aspalter, 2002a; Low and Aspalter, 2003). A rural “semi-contributional” social security system, the Previdência Social Rural, was established in 1971, and strengthened by the 1988 Constitution. Here, contributions are based on commercialized part of the agricultural production of farmers (currently at 2.1%), but the contributions are collected from the (usually larger) buyer (hence lowering the administration costs of the system). The flat-rate benefits equal the minimum wage. This system received more than three times the federal funds (1.3 percent of GDP) as the largest CCT system, the Bolsa Família, and hence contributed a great deal to lowering, yet very slowly, income inequality across the country (which is often forgotten in analytical studies focusing on the outcomes of CCT systems, as is the effect of raising minimum wages, and the overall growth in GDP) (see SPFI, 2010; Mussi and Pinto, 2014; Robles and Mirosevic, 2013). This fourfold division of the Brazilian old-age income security system is the result of the 1988 Constitution, which still upholds the long-lasting Bismarckian tradition of the Brazilian 159

Christian Aspalter

welfare state system due to its fragmented organization, and preferential treatment for urban middle classes and civil servants, while having allowed for the development of the Brazilian welfare state system to take up different directions at the same time (see Mussi and Pinto, 2014). Hence, it is not a deviation from the Constitution that led to a different course of development of the Brazilian welfare state system, but merely a different interpretation and accentuation of the Constitution, which made room for different interpretations, as well as ample room for privatization and decentralization of social security and social services. This fits what Cortes (2015) identified as gradual transition to neoliberalism in the case of Brazil (see also Haggard and Kaufman, 2008) – some countries transformed early, others later; some transformed fast and others gradually. In this regard Brazil is not an exception, but rather perfectly fits into the overall development of welfare state systems in Latin America (see Aspalter, 2011). What Fleury (2011) has called the “hidden welfare state of Brazil” is precisely this mixture of neoliberalism, which emphasizes privatization, decentralization and a minimal approach in social assistance, paired with conservatism (in the Bismarckian tradition, i.e. favoring elites and making distinctions between the rich and the poor, especially favoring civil servants and special interest groups, for example), covered with a layer of “formal” universalism, especially in health care, that is, constantly undercut by the twin forces of neoliberalism (decentralization, fiscal austerity, privatization) and conservatism (preferential support for the influential and the rich) in the case of Brazilian welfare state politics.

Health care services The 1988 Constitution led to the creation of the universal health care system, the Sistema Único de Saúde (SUS, the Universal Health Care System) in 1990, the year it was implemented, thus effectively replacing the old Bismarckian health insurance system that was set up in 1923. The history of partial universalism in public health care goes back to 1949, with the erection of the Domiciliary Urgent Medical Service, where universal health care was provided to emergency and urgent cases. The universal health care system of the new SUS is based on four rather contradicting principles: universalization, decentralization, regionalization and social control (see e.g. Buss and Gadelha, 1996). In 1994 the government set up the Brazilian Family Health Program, which followed a dual strategy to prevent disease and to maintain the health of the population. Two years later, the Family Health Strategy Program continued its work by providing free access to basic health care by way of offering integral assistance by a multidisciplinary team close to people’s homes. The financial reimbursement system before 1998 was based on verified invoices only.Thereafter, a new reimbursement mechanism was established, similar to the case of the Italian National Health Insurance (with its quota capitaria) (see Aspalter, 2012b), a minimum value per capita (the Piso Assistencial Básico, PAB), which was from then on directly granted by the National Health Fund to the municipalities. This policy was extremely important (as it was in the case of Italy), as it meant that, from then on, the severely problematic constellation of (1) health care consumers always asking for more and better services, (2) health care providers asking for more money for themselves (administration) and the treatment of patients and so forth and (3) a third party having to come up with the thus ever-increasing finances needed (that is, “the-third-party-pays logic”) has finally come to an end (Farias, 2003). The PAB amounts to R$10 (or about US$5) after invoice control, and serves to finance items such as basic care, vaccinations, prenatal care and minor surgeries without hospitalization. 160

The Brazilian welfare state system

At the end of the 1990s, only about 33 percent of municipalities had budgets or reimbursements for their health services. And among those 33 percent, the municipalities only received a partial part of the maximum R$5, as they more often than not were not able to show all the necessary invoices needed to collect the entire amount. So mostly the better-off municipalities got reimbursed and funded for their health care services from the federal government – thus exacerbating national inequality also in the area of health care. Hence, universalism in the Brazilian health care system was deconstructed under the name of decentralization and the reality of administrative shortcomings (Cruz et al., 2014). In the late 1990s, municipalities were given greater control of contracts and agreements when contracting out public health care provision to the private sector, that is, companies and non-governmental organizations. By the turn of the century, municipalities turned from the main health care provider to the main health care manager, as they had become the center of decision making, which led to an increase in delegation of service provision responsibilities and a greater focus on general policy actions, service supervision and expenditure control (Cruz et al., 2014). Publicly financed private service provision was one major reason for the greater degree of privatization, which was fully intended by national policy makers. The other main reason was the chocking of funds for the national health care system, which decreased its quality and quantity of public health care services provided (see e.g. Alves and Timmins, 2001; Novy, 2001; Farias, 2003). Due to the lack of resources that public health care system could not offer an adequate quantity and quality of services, with adequate geographic distribution, as well as equal and timely access thereof. As a result, for instance, the Brazilian health care system has a great lack of nurses, with one of the lowest ratios of nurses to doctors in the developing world (Alves and Timmins, 2001: 10). At the same time, the private health care industry was heavily subsidized by way of tax exemptions and tax rebates. Consequently, there are now three main sub-systems of the Brazilian health care system: (1) a relatively weak system of public health care provision, plus (2) a strong system of publicly funded private health care provision, as well as (3) a strong system of privately funded private health care provision (see e.g. Buss and Gadelha, 1996: 290). This has created a dualism between a relatively weak public health care system with a lesser quality of services and a stronger, private health care sector that particularly addresses the needs of the rich and better-off, leaving the universal right to health care “seriously compromised” (Farias, 2003: 37). In addition, there is a great regional inequality in health care services provided.The northern region is worst off, while, not surprisingly, the rich southern region is marked by a relatively good health care provision. For example, Table 9.2 looks at into the problem of missing attending doctors by region, demonstrating a strong inequality in the Brazilian health care system. Table 9.2 Unequal access to health care across Brazil (by region): the case of no attending doctors

North Northeast

public system private system public system

Percent Who Received Health Care Sought

No Attending Doctor as the Reason for Not Receiving Health Care Sought

93.6 97.7 93.8

53.3 50.0 29.7 (Continued )

161

Christian Aspalter Table 9.2 (Continued)

Central/West Southeast South All

private system public system private system public system private system public system private system public system private system

Percent Who Received Health Care Sought

No Attending Doctor as the Reason for Not Receiving Health Care Sought

98.2 94.1 96.8 95.4 98.8 94.7 99.1 94.6 98.5

7.7 22.1 40.0 28.8 23.5 17.2 16.7 28.5 24.0

Source: Alves and Timmins (2001: 26).

Social assistance The Benefício de Prestação Continuada (Continuing Benefit Payment) program was set up in 1988. It was anchored in the Constitution but was only implemented in 1996. It is partly a means-tested pension program for rural workers that ensures a monthly income at minimum wage level for those over 65 with not enough incomes or other economic resources. For rural workers to qualify, they have to prove that they earn less than 25 percent of the minimum wage, per family member, and that they do not already benefit from any other income-replacement program (SPFI, 2010). This program, however, also provides these benefits to people with severe physical and other disabilities – hence it constitutes partly a conditional and partly a categorical cash transfer system (Aspalter, 2016; see Table 9.4). The Benefício de Prestação Continuada program is one of the most influential programs in Brazil in terms of enhancing equality besides, for example, the “semi-contributional” Previdência Social Rural, also in terms of regional imbalance of resources. The benefits of the Benefício de Prestação Continuada program amount to 0.5 percent of GDP, more than the 0.4 percent of Bolsa Família. The government subsidies to Previdência Social Rural (1.3 percent of GDP) alone are even three times as large as the benefits under the Bolsa Família program (see SPFI, 2010; Ribeiro and Ferreira de Souza, 2015; Robles and Mirosevic, 2013). In 1995, first municipal conditional cash transfer programs, called Bolsa Escola programs, were set up at the local government level. These programs focused on families with undernourished children and street children, and have been subsequently copied by other local governments across the country as well as state governments (Lindert et al., 2007; Fiszbein and Schady, 2009). In 2001, the central government implemented its first federal conditional cash transfer program, the Federal Bolsa Escola program. This program was designed (1) to fight poverty by way of increasing educational attainment, (2) to increase the incomes of poor families, (3) to fight child labor and (4) to develop a federal social safety net (Lindert et al., 2007). In 2003, the government merged a number of federal conditional cash transfer programs under the umbrella of the new Bolsa Família program: the Bolsa Escola, the Bolsa Alimentação, Auxilio Gas and Fome Zero. The benefits of the new Bolsa Família program were based on (1) proxy means-tests, that is, self-reported incomes and total household spending, and not strict 162

The Brazilian welfare state system

asset- and means-tests (AMTs); and (2) on overall household information (number of household members, family composition, educational level, employment status, civil identification, etc.), which has been processed centrally by a special federal database, the Cadastro Único, of the Ministry of Social Development. Poor people in relatively rich (or less poor) municipalities may therefore not get benefits at all. The Bolsa Família program mandates regular school attendance of children aged 6–15, and pregnant and lactating women and children up to 7 years of age need to have regular health care visits and vaccinations, as well as mandatory follow-ups on children’s nutritional development (see Lindert et al., 2007; Soares et al., 2009; Barrientos et al., 2010; MSDFH, 2015; Aspalter, 2016). In 2003, the government started the Fome Zero (Zero Hunger) Program, which in the new tradition of the Brazilian welfare state system integrates several social policy sectors (see Kleiman, 2011; MSDFH, 2015), rather than offering one particular program in one particular field of social policy, or one particular field of action. The multidimensionality of poverty demands a widespread concerted social policy action (a truly integrated approach in social policy) for different special target groups or whole population segments. The insufficient income and insufficient assets (land, housing, savings) are valid indicators of deprivation, but they only give a limited, fragmented picture of the entire poverty conundrum. Other factors – like e.g. physical, cognitive and mental health conditions; social conditions (exclusion, family stress, family situation, etc.); geographic location of the household (least developed regions, or precarious settlements, like slums), as well as cultural conditions (e.g. of indigenous populations, or sub-cultures within slums, or the working classes) – multiply or reduce the impact of the lack of income or wealth in each individual or family. The poor suffer from lack of instruction, land access, health, housing, justice, family and community support, inputs for production, credit access and other productive resources, active participation to political, social and cultural institutions and access to opportunities, due to lack of social and cultural capabilities, such as e.g. powerful relatives and friends in e.g. hospitals, local schools, government offices, law and accounting firms, banks, companies, and exclusive clubs, etc. (adapted from Kleiman, 2011) The Fome Zero program has been designed to incorporate numerous multi-sector social policies related to food security and poverty reduction, especially concentrating on four major areas: (1) safeguarding nutrition, (2) the strengthening of family agriculture, (3) family income and (4) social responsibility and social participation.The Fome Zero program was aided by several institutional changes, particularly the inclusion of food as a right in the Constitution, the Organic Law on Food Security, the setup of the National Food Security System, the School Meals Law, as well as additional support from, for example Bolsa Família and Food Procurement programs (da Fonseca Menezes, Brait-Poplawski and Santarelli Roversi, 2012; Robles and Mirosevic, 2013). The Brasil Sem Miséria (Brazil without Misery) program followed the example set by the Fome Zero program, offering an integrated social policy strategy that spans cash benefits and public services in a large number of public policy and social policy areas – hence, effectively, within the limits of this program, putting an end to compartmentalized social policy thinking and social policy making. The Brasil Sem Miséria program was set up in 2011, due to the recognition of the government that other social assistance programs in the area of poverty reduction policy fail to cover the families and individuals that are most in need of those benefits and services (see da Fonseca 163

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Menezes, Brait-Poplawski and Santarelli Roversi, 2012). There is a great extent of exclusion error (and inclusion error) (see Lavinas, 2012, 2013) in social assistance programs, despite – or especially because of – the widespread use of assets and means-testing applied. Excluding potential recipients is not incidental, but rather predictable, since [economic] targeting seeks to shrink the demand for means-tested benefits [and/or services], instead of attempting to reach the poorest among the poor and provide the right benefit to the right individual. (Lavinas, 2013: 33) The Brasil Sem Miséria program has been designed to foster cooperation of social programs in the area of education, health, social assistance, sanitation and electricity by means of new economic and employment policies that provide (1) income guarantees, (2) economic inclusion and (3) access to public services. It aims to promote the inclusion of the extremely poor into the productive economy, while specially designing different programs for the urban and rural environments. It uses the Bolsa Família Cash Card to distribute benefits, and applies new methods, for example by distributing seeds and seedlings or a cash grant program for the poor to conserve the natural environment in rural areas, or by providing courses that lead to professional qualifications or access to micro-credits in urban areas (da Fonseca Menezes, Brait-Poplawski and Santarelli Roversi, 2012; Robles and Mirosevic, 2013). Recently, yet another program was developed to specially cater to the needs of extremely poor families with children under the age of 6. The Brasil Carinhoso (Caring Brazil) program has been designed to ensure preferential access to public social services, as well as for providing guaranteed cash transfers for these particular families (Robles and Mirosevic, 2013).

The outcomes and performance of the Brazilian welfare state system With regard to welfare state “input” (the “how much”) does not do bad, as enough resources have been employed in the Brazilian welfare state system, but they are not employed for the right target groups (the poor) and the Brazilian welfare state system keeps strong regressive elements – that is, it has been and still is being designed to support the rich as much as (or sometimes even more than) the poor. In terms of health care input, the Brazilian welfare state does quite well, with 4.1 percent of GDP spent by the government on health care services, and within the range of other Latin American and Caribbean countries, but it is much less than the 7.3 percent spent by the Costa Rican government, and the lead country, Cuba with its 9.5 percent spent on universal public health care system. Cuba, without a doubt, has a true universal welfare state system (see MesaLago and Pérez-López, 2013; Aspalter, 2017; Mesa-Lago, 2016). With regard to the number of doctors per population, Brazil does a bit better than the average with 18.9 doctors per 10,000 population, but still only about half of that of Uruguay (37.4 doctors), and even much more less than Cuba, which is truly in a class by itself with 67.2 doctors (Table 9.3). In education, the Brazilian government is, with 5.8 percent of GDP, among the higher spenders in the Latin American context, but still spends less than, for example, Argentina (6.3%), Bolivia (6.9%), Costa Rica (6.3%), Jamaica (6.1%),Venezuela (6.9%), and, of course, Cuba, which spends a staggering 12.8 percent of GDP on public education (Table 9.3). The empirical evidence for how the Brazilian welfare state system really works is much more important than (1) lip service of political candidates and elected presidents, (2) their party 164

Iceland Luxembourg Finland Norway Sweden Japan Singapore Slovenia Austria Italy Czech Republic Denmark Germany Portugal France South Korea Poland Spain Greece Australia UK Cuba Canada New Zealand Uruguay

28.0 26.0 26.8 25.0 23.0 37.6 46.3 23.7 26.3 31.9 24.9 24.8 27.0 38.5 30.6 31.1 34.1 32.0 34.3 30.3 32.3 n.a. 32.1 36.2 45.3

66.4 65 61.5 63.3 74.2 54.7 68.9 62.6 64.6 60.9 62.6 80.8 66.7 66.7 73 57.9 65.7 57 65.4 62.2 69.7 n.a. 68.8 65.1 70.8

Gini Index Gini Index of Fam. of Asset Income Distribution Distribution 82 82 81 82 82 84 83 80 81 83 78 80 81 81 82 81 77 82 81 83 81 79 82 82 77

Life Expectancy at Birth

Table 9.3 Comparison of welfare outcomes in Latin America

2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 5 5 6

Infant Mortality Rate

2 2 3 3 3 3 3 3 4 4 4 4 4 4 4 4 5 5 5 5 5 6 5 6 7

4 11 4 4 4 6 6 7 4 4 5 5 7 8 9 27 3 4 5 6 8 80 11 8 14

34.8 28.2 29.1 37.4 32.7 23.0 19.2 25.2 48.3 40.9 36.2 34.2 38.1 n.a. 31.8 21.4 22.0 37.0 n.a. 32.7 27.9 67.2 20.7 27.4 37.4

Child Maternal Doctors Mortality Mortality Rate per 10,000 Rate per 100,000 Population Live Births 7.4 5.6 6.8 8.4 7.8 8.2 1.4 6.6 8.5 7.2 6.3 9.3 8.6 6.6 8.9 4.1 4.9 6.8 5.9 6.1 7.8 9.5 7.7 8.5 6.0

Government Expenditure on Health Care, percent of GDP 7.6 3.7 6.8 6.9 7 3.8 3 5.7 5.9 4.5 4.2 8.7 5.1 5.6 5.9 5 5.2 5 4.1 5.6 6.2 12.8 5.4 7.4 4.5

4.5 4.9 8.1 3.6 8.1 4.1 1.9 13.1 4.9 12.4 7.1 6 5.7 16.8 10.2 3.2 10.3 26.3 27.9 5.7 7.2 4.3 7.1 6.4 6.5

(Continued )

13.6 18.8 17.7 8.6 23.7 7.9 6.7 20.6 8.3 35.3 19.5 14.2 8.1 37.6 23.8 9 26.5 53.2 55.3 11.7 21 3.1 14.3 17.7 18.5

Government Unemployment Unemployment Expenditure Rate Rate, in Education, 15–24 years percent of GDP

80.1 77.7 73.2 74 78.4 71.2 74.6 74.9 n.a. 68.6 73.8 76.5 76.3 76.6 68.9

n.a. 76.6 74.3 76 75.5 72.3 77.9 70.7 76.2 75.5

45.0 52.1 50.3 45.8 51.9 39.0 46.9 48.3 n.a. 45.5 48.1 55.9 n.a. 51.9 n.a.

n.a. 53.2 57.7 48.5 40.5 47.2 55.1 44.6 47.0 59.2

Sources: WHO (2015), CIA (2015).

US Chile Costa Rica Argentina Brazil Venezuela El Salvador Mexico Bahamas Jamaica Peru Colombia Belize Panama Trinidad and Tobago Suriname Paraguay Honduras Ecuador Nicaragua Dominican R. Guatemala Guyana Bolivia Haiti

Gini Index Gini Index of Fam. of Asset Income Distribution Distribution

Table 9.3 (Continued)

19 19 19 20 21 23 27 29 33 57

6 8 9 13 13 13 14 14 14 14 14 15 16 16 18

79 80 79 76 74 76 72 76 75 74 77 79 75 77 70 77 75 74 75 73 77 72 63 68 62

Infant Mortality Rate

Life Expectancy at Birth

21 22 23 23 24 27 32 35 41 76

7 9 10 14 14 15 16 16 17 17 18 18 18 19 21 130 110 120 87 100 100 140 250 200 380

28 22 38 69 69 110 69 49 37 80 89 83 45 85 84 n.a. n.a. n.a. 16.9 n.a. 14.9 9.3 2.1 4.7 n.a.

24.5 10.2 11.1 n.a. 18.9 n.a. 16.0 21.0 28.2 4.1 11.3 14.7 8.3 15.5 11.8

Child Maternal Doctors Mortality Mortality Rate per 10,000 Rate per 100,000 Population Live Births

3.0 3.4 4.1 2.5 4.1 2.7 2.4 4.6 3.5 1.8

8.5 3.4 7.6 5.3 4.1 1.6 4.3 3.0 3.4 2.8 2.7 4.9 3.9 5.4 2.6

Government Expenditure on Health Care, percent of GDP

n.a. 4.8 n.a. 4.4 4.6 2.2 3 3.2 6.9 n.a.

5.4 4.5 6.3 6.3 5.8 6.9 3.4 5.1 n.a. 6.1 2.8 4.4 6.6 3.5 3.2

9 6.6 4.5 4.2 7.2 15 4.1 11 7.4 40.6

7.3 6 7.9 7.5 5.7 7.9 6.3 4.9 16.2 16.3 3.6 9.7 15.5 4.5 5.9

21.5 11.2 8 11.1 8.6 29.4 7.5 46.1 6.2 n.a.

17.3 16.3 18.4 18.3 15.4 17.1 12.4 9.4 30.8 34 9.5 21.9 19.5 14.6 10.5

Government Unemployment Unemployment Expenditure Rate Rate, in Education, 15–24 years percent of GDP

The Brazilian welfare state system

membership and/or (3) strong welfare- and equality-supporting stipulations in the Constitution, which by and large have not been implemented, or only in a fragmented and twisted manner over the past couple of decades. The health care system is unequal in its provision, due to strong regional imbalances, also there is a great deal of privatization going on, first, through contracting out and, second, through direct state subsidies (in form of tax exemptions and rebates) for private health insurance providers. Also, the conditional cash transfer systems are rather meager in comparison to other items of Brazilian social spending and amount only to 0.4 percent of GDP. The CCTs as applied in Brazil are mainly functioning to support political votes and to manage poverty of the masses, not to prevent or abolish it. Because the proposals for targeting resources and privatization occur in the context of sharp social inequalities, they serve to consolidate the inequality. On one side, a high-quality, private system of social services is created, financed by and exclusively available to the highest income strata. On the other side, a state system of social assistance operates with a minimal budget because the highest income strata do not contribute to it. Thus, it is able to distribute only some limited basic services to the indigent portion of the population. (CEPAL, 1988, cited in Draibe et al., 1995) The current situation has not changed much from this quote, which described the situation at the end of the 1980s. Nowadays, the Brazilian welfare state system is still characterized by the duality between social insurance and private saving plans for the rich and the well-to-do middle classes and highly limited and stigmatizing (and poverty entrapping) social assistance for the poor. Each welfare system, the one for the rich and better-off middle classes based on social insurance and private savings plans (with income tax exemption), and the one for the poor (based on asset- and means-tests, or proxy means-tests, and other conditionalities), covers roughly about half of the Brazilian population (see Barrientos, 2013; GB, 2009). Nowadays, a typical recipient family of social assistance (conditional cash transfers): • • • • • • •

Lives in the urban area of a northeastern town, in its own household; Is headed by a women of African descent, aged 37, self-employed, not covered by social insurance, with incomplete basic schooling; Has four people; Was registered and granted a benefit in Bolsa Família in 2006; Sends its children to public schools and they are currently behind in school; Earns a monthly per capita income of US$26.18; Receives a financial benefit of about US$60 (Kleiman, 2011).

Economic development of the past two decades did much more to reduce poverty levels than this very narrow economical targeting of social assistance benefits (Figure 9.1), which in fact traps people in poverty, because of the workings of the “poverty trap” and “savings trap” (see Aspalter, 2014, 2015; Midgley and Aspalter, 2016). Furthermore, the raising of the minimum wage, especially since 2005, has significantly impacted the overall level of poverty in the country. In 2009, in total about 23.5 million people received the minimum wage, or pension benefits below minimum wage and consequently subsidized by the government, or in the form of social assistance to the poor over 65 or persons with disabilities (see Ban, 2013; Lavinas, 2013; Ribeiro and Ferreira de Souza, 2015). 167

Christian Aspalter

100 90 80 70 60 50 40 30 20 10 U Ire K la n Au d st ra lia Ita ly Sp a G er in m Ne an th er y la nd s Fr an c Be e lg iu De m nm ar No k rw ay Fi nl an Sw d ed en

US Ca A na da

Br a

zil

0

Figure 9.1 Reduction in poverty after public cash transfers according to OECD poverty definition (in %) Source: Kay and Matijascic (2010).

In order to be able to evaluate the right size of the input (the “how much”) and the right calibration of the “throughput” (the “how”), the “outcomes” (the “what has been achieved”) deserve our greatest scrutiny. The infant and child (under-5) mortality rates of Brazil (13 and 14 respectively) are better than most countries in the Latin American region, but still comparable to, for example, Argentina (also 13 and 14), Mexico (14 and 16) and El Salvador (14 and 16). But, they are still much higher than, for example, Uruguay (6 and 7), Chile (8 and 9) and Costa Rica (9 and 10), and of course Cuba (4 and 6), which has lower infant and child (under-5) mortality rates than the US (6 and 7). The direct comparison of Brazil with its southern neighbor, Uruguay, is very interesting, as infant and child mortality rates in Brazil are at least twice as high as that of Uruguay (Table 9.3). In terms of equality, Brazil is an underachiever, with a Gini index of family income distribution of 51.9. Costa Rica also (perhaps surprisingly) does rather poorly in this category of welfare state outcome, with an income Gini index of 50.3. Nicaragua, to note, only stands out with 40.5, but this is due to the fact that Nicaragua is a very poor country, not that the welfare state is doing a better job there (see countries where people are equally poor, for example Montenegro, with a Gini index of 24.3, one of the lowest in the world, or Belarus some years ago). On the contrary, if the Gini index (e.g. that of income distribution, or that of wealth distribution) is high, this indicates that for sure the welfare state is doing a bad job, and could have or should have prevented this situation (Table 9.3). These findings (summarized in Figure 9.1 and Table 9.3) back up the argument that Brazil is not a social democratic model of welfare state system, and there is no empirical evidence that the Brazilian welfare state model has set out to develop into one either – which is rather sad, but we have to follow the empirical evidence, and not any euphoric argumentation. The findings of empirical data, especially social indicators when compared internationally with other countries in Latin America, are echoing the findings of a great number of qualitative 168

The Brazilian welfare state system

research studies (see e.g. Draibe et al., 1995; Novy, 2001; Farias, 2003; Pierson, 2003, Arbix and Martin, 2010; Aspalter, 2011, 2016; Fleury, 2011; Simionatto and Luza, 2011; Lavinas, 2012, 2013; Ban, 2013; Cortes, 2015; Leopoldi, 2015). Given the empirical evidence and research findings presented here, it is clear that the Brazilian welfare state system – when looking at welfare state input, output, but also the way welfare programs and social security systems are set up (incorporating Bismarckian logic of exclusion of the poor and the disadvantaged, and the neoliberal logic of privatization and decentralization), that is the throughput – is an important example of how the Latin American Welfare Regime works. Brazil is a member of the Anti-welfare Conservative Welfare Regime in Latin America, spanning from Mexico in the north to Chile and Argentina in the south (but not necessarily including all countries in between).

The necessary future direction of the Brazilian welfare state system The Brazilian welfare state system is in desperate need of repair or, more precisely, refashioning. There are two major dilemmas apparent in the case of Brazilian social policy. First, the universal paradigm as set in the Constitution was not translated into practice, and not into universal welfare outcomes either. The governments of the past, by and large, (1) have avoided the implementation of universal social policies and dismantled the social institutions that were in favor of welfare extensions to the whole population (especially corporatist and civil society institutions); and (2) they have not been working towards universal social policy outcomes, but for the most part the opposite was the case (they were holding against such a move in the welfare state system). Second, two of the major social security systems used in Brazil, (1) the (in essence Bismarckian) pension system, which only covers the formal labor market (especially the better-off middle classes), gets a lion’s share of the national welfare budget; and (2) the NET+AMT type conditional cash transfers (CCTs) (Table 9.2), which on the contrary only get very limited resources (about 0.5% of GDP), are working against the interests of the poor and the poorest and increase (instead of decrease) poverty, especially over longer periods of time, due to the side effects of AMT systems and elements (the “poverty trap” and the “savings trap”). That is, on the one hand, the privileged pension system for civil servants that is heavily subsidized by national budgets and only covering a limited privileged part of the population, is strongly regressive in nature and increases social stratification. On the other hand, normal employees who have joined the INSS (Instituto Nacional de Seguridade Social) in the past were being taxed, as regular surpluses of this social insurance system are being used to cover national budget deficits (the opposite of which is the case in European countries, for example, where national budgets are subsidizing Bismarckian social insurance systems and not the other way around) (Novy, 2001). Those who work in the informal labor market do not get any social insurance benefits at all – that is, they are losing out completely on employers’ contributions, and typically work for a much smaller salary. The special constellation and calibration of the Brazilian old-age income security system is the largest contributor, besides the tax system (with its tax exemptions and rebates for the rich and better-off middle classes), to the regressive nature of the Brazilian welfare state system. On the other hand, the particular type of CCTs applied in Brazil (the NET+AMT type, the “bad CCTs”), bases entitlements on the condition of passing assets and means-tests (or proxy 169

Christian Aspalter

means-tests which are mostly based on self-reported incomes or estimates), which have a strong poverty-increasing effect over time due to their specific incentive structures that are inherent in AMT systems. That is, positive behavior, like earning more income or saving more money, is being punished, while the lack of such resources is being rewarded (as it were mandated) by the government. The workings of the phenomenon of “savings traps” and “poverty traps” are the key source for increasing poverty in countries and regions that use fully or partially AMT-based social assistance benefits and services (Aspalter, 2014, 2015, 2016; Midgley and Aspalter, 2016). Having that said, the author is aware of the political constraints that impede social welfare improvements and the implementation of social policy reforms (see Lindert et al., 2007; Ferreira and Robalino, 2010; Lindert and Vincensini, 2010; Layton and Smith, 2011; Niño-Zarazúa, 2011). But, as this study has shown, there are other options, which are also – and, given their great efficiency and effectiveness, even more – politically interesting, that is, beneficial for any candidate running for office or re-election, be it city mayor, governor or president. Purely non-economically targeted (NET-based) conditional cash transfers (the “good CCTs”) are a very good option to successfully fight and reduce poverty in any country, region and city, no matter the state of its economic development (Table 9.4). The same effects that make NET+AMT based conditional cash transfer systems (the “bad CCTs”) so popular, or successful in supporting a political candidate in elections or their legitimacy during the time they hold a political office, are also present in NET-based conditional cash transfer systems (the “good CCTs”). The only problem there really is is knowledge and awareness (1) that AMT-based benefits and serviced are doomed to long-term failure due to their poverty-increasing side effects (caused by the savings trap and poverty trap) and (2) that there is another politically much better and very viable option out there. By abolishing the AMT elements (the asset- and means-tests, as well as any proxy meanstests), the very same CCT systems can, and will, be transformed from an accidentally “bad CCT” system to a truly benevolent “good CCT” system. For this, a great deal of experience has been collected nationally and internationally especially in the Latin American and Caribbean region, but also elsewhere around the globe (see e.g. Handa and Davis, 2006; Barrientos, et al. 2010; Cecchini and Madariaga, 2011; Lavigne and Vargas, 2013; Robles and Mirosevic, 2013; Aspalter, 2016). Apart from changing the bad CCTs into good CCTs, the Brazilian government needs to pledge absolute solid practical support for equalitarian and universal social policies – not ideological and verbal support alone. Hence, “formal” universalism needs to be replaced with “real” universalism. The principle of universalism needs to be applied consequently in different fields of social policy, from health care and education to social insurance (without exceptions for and concessions to the influential, the rich and the better-off), to transcend into a kind of “real” universalism, one that benefits the poor, the minorities and the vulnerable, wherever and whoever they are. A great deal of social investment in areas of supply side interventions in health care, especially in the vast countryside of Brazil (sufficient and sufficiently trained health care personnel, facilities, equipment and medicines; especially in the northern and western regions), as well as in education (here focusing not only on school attendance, but especially learning outcomes and teaching quality, such as, professional training of teachers and proper supervision of their actual efforts to teach students in the classrooms). On top, after the bad CCTs (NET+AMT–based CCTs) have been transformed into benevolent, good CCTs (purely NET-based CCTs), the scope of these new CCTs that are only based on non-economically targeted conditions needs to be upgraded significantly, to have a salient impact on the nation and social development as a whole. 170

Universal Benefits and Services

Offered to a single, usually large, general population group

• age • gender • family or marital status • nationality • residency or years of residency • number and/or age of children, etc.

Type of Social Assistance Programs

Special characteristic

Conditionality based on

UBS

• age • gender • family status • occupation • religion • ethnic background • geographic location/ residency • past record of formal labor force participation • past absence of formal labor force participation, etc.

Offered to one or more specific population groups, be they small or large

Non-Economically Targeted Programs

NET

Usually based on geographic targeting, or about to be affected by a certain disaster • occurrence or likelihood of disaster or emergency, and severity thereof

Disaster and Emergency Relief Programs

DER

Categorical Cash Transfers

Table 9.4 Types of social assistance benefits and services

• recorded individual behavior, such as vaccination records, doctor visits, school attendance, measuring the height and weight of babies/ infants at a clinic, etc. • here it would be possible (i.e. likely and recommendable) to apply a combination with some kind of geographical targeting of potential beneficiaries, or geographical targeting of financial means available for targeting, or any other non-economic criteria

Special type of NET transfer focusing on some specific recorded individual behavior

Conditional Cash Transfer Programs

NET (“good CCTs”)

Asset- and MeansTested Programs, i.e. Economically Targeted Programs Focusing on economic status or achievement (or the absence thereof)

AMT(ET)

(Continued )

• recorded individual behavior, such • current salary level as vaccination records, doctor visits, and other forms of school attendance, measuring the income height and weight of babies/infants at • accumulated assets a clinic, etc. of all kinds (house • asset- and means-tests (usually proxy ownership, savings, means tests, based on self-reported etc.) incomes, and/or consumption spending, as well as physical conditions of the house in combination with number of children or household members, etc.) • sometimes also in combination with some kind of geographical targeting of potential beneficiaries (e.g. areas must reach a certain level of poverty, and/

Mixing different approaches (AMT and NET in particular), while focusing on some specific recorded individual behavior

Conditional Cash Transfer Programs

NET + AMT(ET) (“bad CCTs”)

Conditional Cash Transfers

Cuba, etc.

Thailand, Mexico (PET), etc.

NET

throughout the world

DER

Categorical Cash Transfers

or the availability of a hospital or clinic and school in the area) or geographical targeting of financial means available for targeting (e.g. in Brazil) Argentina, Brazil, Chile, Honduras, US, UK, Australia, Jamaica, Mexico, Nicaragua, etc. Hong Kong, etc.

for targeting (e.g. family size/ status, number of children, gender, occupation, ethnic background) Bolivia, El Salvador, Mexico (PAL), etc.

AMT(ET)

NET + AMT(ET) (“bad CCTs”)

NET (“good CCTs”)

Conditional Cash Transfers

Source: Aspalter (2016). Instead of asset- and means-tests, governments need to apply more geographic targeting, i.e. not only to conduct geographic targeting for funding of local CCT programs (and a much better, more equal and fair job can be done also with regard to this targeting of funds in the case of Brazil), but also and especially to implement fair (i.e. scientifically based on social indicators that clearly describe the target groups, the poor and only the poor – and not political target groups based on political purposes) geographic targeting, of regions, cities, villages, and, most important of all, households and individuals.

applied in, for example:

UBS

Table 9.4 (Continued)

The Brazilian welfare state system

Conclusions In a nutshell, the more we look at the larger details of the Brazilian welfare state system, its columns, programs, benefits and financing, the more easily we can determine its system-intrinsic nature and make out its conservative and neoliberal features and the outcomes it produces (e.g. highest levels of inequality in the world). When looking only at certain stipulations in the Constitution, or follow certain statements of presidents, or look at their party membership, one is certainly very much misled with regard to the nature and inner workings of the Brazilian health care system, social security system and so forth. This study has, hence, confirmed the membership of Brazil in the ideal-typical Anti-welfare Conservative Welfare Regime in Latin America (based on Max Weber’s methodology of identifying ideal types in comparative social research) (see Aspalter, 2011, 2012a). If the Brazilian welfare state system is to live up to its very own purpose, and the overall purpose of social policy – that is to save lives from premature death, accidents, disease, poverty and misery of any kind (see Aspalter, 2017) – then a number of system changes are needed. The ongoing parametric changes, here and there, to lighten the suffering of tens of millions, will not work if they are not accompanied by a string of systematic changes of the Brazilian welfare state system. This chapter has identified a number of systemic weaknesses of the Brazilian welfare state system, which are: The asset- and means-tests, as well as proxy-means-tests cause more poverty in the long run (by way of the phenomena of “poverty trap” and “savings trap”). Therefore, NET+AMT– based CCT systems need to be converted to purely NET-based CCT systems (the bad CCTs need to be transformed into good CCTs). 2 Mere “formal” universalism in Brazilian social policy needs to be replaced by “real” universalism, in all policy fields of social policy; this mandates real access to universal and equally good health care throughout all of the country, universal achievement in the education system throughout all of the country, universal organization and equal benefits and tax funding for all members of the social insurance (old-age income maintenance system). 3 More supply-side interventions (investments) are to be made in the public health care sector (more nurses, more clinics in the countryside, etc.), the education sector, and other social service and public service areas that are paramount to people’s health and well-being. 4 The preferential treatment of civil servant pension system, private health care provision, and private pension systems needs to be rolled back, to create new resources for the poor and underprivileged. 5 The scale of purely NET-based CCT systems needs to be upgraded significantly to have a lasting impact on the overall distribution of incomes and wealth. 1

By and large, these policy recommendations are typical for the recently extended Developmental Social Policy (DSP) paradigm in normative social policy (Aspalter, 2014, 2015; Midgley and Aspalter, 2016; see Midgley, 1995, 1996, 1999, 2003, 2008, 2013).

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10 The Nigerian welfare state system With special reference to the challenges of developing a social security system Bruce Josephson

Nigeria’s travails, while hardly unique within the developing world, are surely exceptional in their scope and persistence. Mass poverty, economic stagnation, endemic corruption, political instability, weak institutions, and social conflicts can be found in many countries, and viewed in this light . . . There is no question, however, that Nigeria has failed profoundly as a state, a nation, and an economy. Central authorities cannot provide stable governance, in the sense of legitimate rule and essential public goods . . . Slow growth and rapidly rising population have yielded dramatic increases in poverty. (Lewis, 2006: 83–84)

Nigeria has the largest population of any country in Africa, and its population continues to grow at a rapid rate, meaning that it could rank only less than China and India in the not too distant future.While rich in oil, the vast majority of people remain in poverty, and at present it does not appear the situation has improved since Lewis’s statement a decade ago. This chapter describes social welfare in Nigeria in the context of the challenges Nigeria faces. In many ways Nigeria is not one nation but many, each with its own desires for the future of the country. So this chapter will first give some background on Nigeria in terms of the issues which present problems to a welfare state; second, it will examine how effective social welfare is in Nigeria; and third, it will look at how the Nigerian social security system has fared, and finally end with some conclusions.

Issues which present problems to the establishment of a Nigerian welfare state system To understand Nigerian social welfare, we first need to look at its demographic features. Nigeria has more people than any other country in Africa, and its population continues to rise rapidly. According to World Population Projects, it now has about 160 million people, a great increase from 1950 when it had only 38 million people. Projecting from the present day, a United 178

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Nations report has projected that in not too many years Nigeria will become the third most populous nation in the world (440 million in 2050 and 914 million in 2100) (UN, 2013) Besides its growing population, Nigeria’s population has a high percentage of young people (Falola and Heaton, 2008: 5–6). According to the 2014 CIA World Factbook, the population consisted of these numbers in terms of age cohorts: 0–14 years, 43.8 percent; 15–24 years, 19.3 percent; 25–54 years, 30.1 percent; 55–64 years, 3.8 percent; and 65 years and over, 3 percent.These numbers have particular significance to social security in the country. A second important feature to understand the Nigerian welfare state is its diversity of people, and this diversity has consequences. Diversity in Nigeria, to a large degree, comes because in the colonial era, the British artificially decided on the boundaries of the present nation. They ruled what is the current country of Nigeria from 1860 to 1960, forging a nation out of more than 350 diverse cultures that had never before existed together in a nation state. Great Britain further increased divisions by giving power to regions, which soon became dominated by the largest ethnic groups (Falola and Heaton, 2008: 109, 158–159), and providing access to health and education and commercial resources to those living closer to the coast than those farther north, pitting groups against each other (Lewis, 2006: 96), giving more help to some groups than others, and by introducing more diversity by introducing Christianity to the country. While there are many different groups in Nigeria, most scholars talk about the country in terms of three large groups: Hausa-Fulani, Igbo and Yoruba. The Hausa have more commonalities to people in Niger and Cameroon than to people in southern Nigeria; and the Yoruba have more in common with Yoruba in Benin and Ghana (Hill, 2012: 1). As anti-colonial attitudes developed in the country rather than uniting Nigerians, it further divided them because opposition to colonialism took place in terms of previous ethnic divisions, so the Tiv, a relatively small group, became famous for their opposition to colonial rule. Different parts of the country become dominated by the three groups. In the northern part of the country the Hasau and Fulani people rule: in the southeast the Yoruba have become dominant; and in the south central part of the country the Igbo dominate. While English serves to unify Nigerian people, there are also three dominant languages in the country corresponding closely to these groups: the Hasau (21% of the population), Yoruba (20%), and Igbo (Ibo) (17%) languages (Falola and Heaton, 2008: 4). While the country has many other ethnic groups besides these three, the strength of these here creates the danger of one of these three groups attempting to form a separate nation state (and in turn, the danger of further splintering into smaller ethnic groups because many other ethnic groups number in the millions). In 1967 the area where the Igbo predominate declared itself independent. The army divided, and a civil war took place until January 13, 1970. During the conflict 1–3 million people died, and more civilians died because of famine which accompanied the war. While the war was terrible, it did show people that the army did have the ability to prevent this group from forming an independent nation from Nigeria. Nowadays the north receives most of the revenue and has more than half of the representatives to Parliament, making the two groups in the south fearful of the north’s power. The power of the north relates not only to numbers, but also the fact that during colonialism the British exercised less power in that area with their policy of indirect rule. The old empires of the north kept the same power networks they had in the former northern Muslim empires, and they united under one of the main Nigerian political parties, the Northern People’s Congress (NPC) in the 1950s. This northern unity has allowed the Muslim north to govern Nigeria for most of its history since independence. During these times it has had democratically elected leaders (Lewis, 2006: 92, 96; Hill, 2012: 47, 110). Religion poses another problem for a Nigerian welfare state. Before colonial rule the area of present-day Nigeria had mainly Muslims in the north and various indigenous religions in the 179

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south. The British created a new mix as they brought Christianity to the region. Although at present some statistics indicate Nigeria has more Christians than Muslims, all agree that Islam will be the largest religion in the future in Nigeria. The country does not have an equal mix of these religions throughout the country. In the northern region, dominated by the Hasau and Fulani, almost all are Muslim. About half of the Yoruba are Christian, about one-third Muslim, and the rest follow traditional religions. The southeast part of the country, including the Igbo and others, is mainly Christian (Falola and Heaton, 2008: 4–5). The Roman Catholic Church makes up the largest Christian denomination in the southeast of the country, but we also find a substantial numbers of Protestant churches, and a few indigenous African Christian churches which have “Africanized” the Christian message. Disputes between Muslims and Christians increased in 1986 when the leader of Nigeria, President Babangida, announced Nigeria would become a member of the Organization of the Islamic Conference (OIC). Opposition from Nigerian Christians forced Babangida not to make this move. More recently opposition developed when a dozen governors in northern Nigeria decided to expand shari’a law, which already was voluntary in civil cases, to making it mandatory in criminal cases. Religious differences between Muslims and Christians still threaten to divide the country, and both sides have committed criminal acts against each other in northern Nigeria (Lewis, 2006: 92–93; Falola and Heaton, 2008: 4–5, 222, 238–239). While the world press has reported the activities of one of these Muslim groups, Boko Haram, other Muslim groups oppose Christians in Nigeria, and some Christians also oppose Muslims. Thousands have died in clashes between Christians, Muslims and government forces. We should also note that the Muslim north has the highest poverty rate in Nigeria, which may be related to the religious extremism of that region (Lewis, 2006: 92–93, 103). This religious division of the country also serves as an obstacle to creating a permanent welfare state in Nigeria. Because of ethnic and religious differences Nigeria has either been called a failing state or a failed state (Campbell, 2011), which has consequences on its welfare provisions. The Nigerian nation state has failed to control all areas of its population. In the Niger Delta region of the country non-government groups rule such as the Movement for the Emancipation of the Niger Delta (MEND), and in places like the city of Maiduguri in the northeast, groups like Boko Haram rule at least part of the time.This is despite government efforts to control all the country. Leaders of Boko Haram say they want to control the whole country, making Nigeria an Islamic state. Also of importance, groups like Boko Haram have contact with other Muslims outside of Nigeria, meaning they are not simply a localized Nigerian group (Adesoji, 2010: 98–99; Hill, 2012: 107–108). MEND has made many demands, but primarily it has demanded the release of key individuals from custody; control of the Niger delta’s resources to be handed to its inhabitants; more of the revenue accrued from oil to be returned to the region’s residents; an end to corruption; and the oil companies to pay vast sums in compensation. (Hill, 2012: 30) It should be noted that MEND avoids attacking ordinary Nigerians, unlike Boko Haram (Hill, 2012: 31). It has mainly attacked oil installations and shipping, including attacks against Nigerians assigned to protect them. A great deal of their success results from their ability to buy government-owned weapons from the Nigerian military (Ejiogu, 2011; Hill, 2012: 107, 126). As noted earlier, both Boko Haram and MEND complain about corruption in their country. And that is Nigeria’s legacy, to be year after year listed as one of the most corrupt countries in the world. In the year 2001 it was listed second worst, and even more recently, in 2011 it was listed as 142 out of 182 (Fund for Peace, 2011: 6). Government heads stole hundreds of millions 180

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of dollars from the country, while underpaid (or unpaid) lower officials demand bribes just to survive (Hill, 2012: 60). Daniel Smith describes corruption in Nigeria in his book A Culture of Corruption: Everyday Deception and Popular Discontent in Nigeria (2007). The military plays an important role in Nigeria in positive and negative ways. On the positive side, General Yakubu Gowon first defeated the Biafran rebels, and then treated them with compassion after the defeat. Other generals helped establish less corruption in government (Hill, 2012: 32–33, 109–110). On the other hand, General Ibrahim Badamasi Babangida and Sani Abachi acted just as corruptly as the leaders they replaced. These generals also committed some of the most extreme human rights abuses in Nigerian history. They took away people’s rights and returned few benefits to people (Hill, 2012: 33, 121; Okonjo-Iweala, 2012: 84–85). Oil plays a great role in the country. It provides much of Nigeria’s total income, but, as indicated earlier, it also causes disunity in terms of groups like MEND. Oil also provides funds for the whole country, making it possible for government officials to pay less attention to agriculture and other former sources of revenue of the country (Severino and Ray, 2011: 152). Because of oil revenue the Nigerian government could not permit Biafra to become a separate country, draining off the funds from the country, and for the government officials who profited by siphoning off money for themselves (Hill, 2012: 91; Okonjo-Iweala, 2012: 3–4). Oil surpasses both agriculture and pastoralism in Nigeria as the main basis of the economy, and, in fact, these decreased, although more people still make their living in them (Falola and Heaton, 2008: 3) than those who work for oil companies. Oil companies by percentage employ relatively few Nigerians compared to Nigeria’s population. Oil, above all, helped to create a rentier state in Nigeria, where the government relied mainly on oil revenue providing money from outside of the country. Because Nigerian leaders do not have to depend on money from inside the state, leaders have had less pressure to maintain good production conditions in the country, and they can increase their power by giving patronage jobs for public projects in the country. This has created an oil-dependent nation, and when oil prices decline so does the Nigerian state. Not only has Nigeria itself become oil dependent, but some have argued that oil also has been responsible for the local communities where oil development is involved becoming dependent and underdeveloped (Ewhrudjakpor, 2005: 527– 528). Also linked to oil, Nigeria, experienced the “Dutch disease,” where non-tradable goods increased in price compared to tradable goods. And along with this price distortion came inflation, focus on big impressive development projects and an increase in urbanization, crime and corruption (Lewis, 2006: 97–99). The positive news is that the World Bank reports that while oil still makes up 40 percent of the economy, from 2002 to 2012 Nigeria’s non-oil economy grew 240 percent while oil wealth has grown slower, meaning the economy has become more balanced in recent years (WB, 2013: 7).

Characteristics of the Nigerian welfare state Jobs and poverty While Nigeria has had some good economic growth according to the World Bank, with a growth of over 7 percent per year, the growth of social welfare has not done as well. One study showed poverty increased between 1980 and 1986, and another study showed the economy has been in decline since 2002 (Ewhrudjakpor, 2005: 521–522, 527). Over 70 million people in Nigeria live on less than US$1/day – about 70 percent of the population – and Nigeria has one of the highest income inequalities in the world (Umukoro, 2013: 305–306). Poverty reduction and jobs have not kept pace with the rapid growth of population described earlier. 181

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Currently at least half of the population lives in extreme poverty, and in the 2013 United Nations Development Report Nigeria ranked 153 out of 186 nations. The report gives an example of how even with success problems persist. So in Lagos state, while unemployment rate decreased from 44 to 23 percent between 2004 to 2010, the number of unemployed people increased because so many people had migrated into Lagos state during that time. For the country as a whole, poverty rates only declined a small amount during the years 2003–2004 and 2009–2010, which makes experts say that in the long term, with the growth of the population, the number of people in poverty is increasing. Poverty is worse in the northern part of the country, and the southwest has the lowest poverty rate. Recent poverty rates in 2010 indicate the lowest rate was in Lagos state (22.9%), and the highest rate was Jigawa (77.5%). The rates increased in half of the Nigerian states. In 2011 the unemployment rate was listed as 44.6 percent as unemployed or out of the workforce (Osheolo, 2010: 264; WB, 2013: 8–10; Umukoro, 2013: 306).

Health and mortality A major problem results from the fact that while Nigeria’s economy steadily increases, its population increases even faster. According to recent figures, a Nigerian woman will on average give birth to 5.5 children in her lifetime. Fertility is declining to some degree, since in 2000 the rate was 6.0, but we cannot predict whether further declines will happen in the future. Along with these birth figures it is important to look at mortality rates. The only reason Nigerian population is not increasing even faster is its high mortality rate. The total infant mortality rate of the country is 128 per 1,000 live births for children under 5, of which 69 per thousand will die before living a year. The mortality rate has declined since 2003, when the mortality rate for children under 5 was 202 per thousand (NPC, 2013: 11–12, 18–19). However, the Nigerian government has set as a goal of 64 per thousand for under 5, and an infant mortality rate of 30 per thousand (GN, 2010). Maternal health also has a lot of room for improvement. The percentage of women who had consulted a skilled health provider before the birth of their last child has increased to 61 percent, although the care was unequally distributed: in urban areas the percent was 86 percent, while in rural areas it was only 47 percent. In terms of areas of the country, the northwest of the country had the lowest, at 47 percent, and the southeast had the highest, at 91 percent.The rates for mothers who received tetanus toxoid injections during pregnancy (which prevent neonatal tetanus) varied in similar ways in the country, although the percentages were lower in all areas since only 53 percent had received injections for their last birth for the country as a whole. And again in delivery care we see the same trends. Skilled health providers delivered 38 percent of children of the last woman’s child in Nigeria, and 36 percent take place in health facilities. In urban areas skilled health care workers assisted in 67 percent of births, while in rural areas it was only 23 percent. Skilled workers assisted in 83 percent in the southwest, while only 12 percent had them in the northwest. Also more educated women were more likely to have better prenatal care and care at childbirth (NPC, 2013: 20–21). Government and non-governmental organizations have tried to improve health in Nigeria. The Nigerian government has set objectives to provide income supplements to those in poor health, and in 1999 the federal government began its National Health Insurance Scheme (NHIS). This guaranteed health services to those who just make token contributions to the system at regular intervals.The system is set up so that the employer would pay 10 percent into the system and the employee would pay 5 percent. Usually the processing time to the system is 60 days. It provided many medical benefits including outpatient care, prescription drugs, maternity 182

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care, preventative care, money for consultation with specialists, eye examinations and glasses or contact lenses, many types of prostheses and dental care (Umukoro, 2013: 310–312). Conditional cash transfers also helped, which were linked to children’s health and education. One of these, In Care of the People (COPE), began in Nigeria in 2007. It gave cash transfers to families as long as very poor families agreed to keep their children in school and take advantage of vaccinations and other free medical care. It currently is active in all parts of Nigeria. However, at the time of Umokoro’s article it had reached only 0.0001 percent of Nigeria’s population. Another program which hopefully will cover 112,000,000 Nigerians is the Community Based Health Insurance Scheme (CGHIS), which is designed to help people deal with high outof-pocket health costs by pooling resources based on programs in both Mexico and Uganda. Hopefully this will work better than former Nigerian programs which did not succeed because community members mismanaged funds (Umukoro, 2013: 315–317).

Child nutrition One way to look at child nutrition is to compare children under 5 in Nigeria to standards developed by the United Nations. Data showed that 37 percent of Nigerian children were considered short, and 21 percent stunted (the worst of the measures).The stunting rate increases over time with infants but decreases as children get close to age 5. As in other instances, urban children have lower rates of stunting (26%), and rural children have higher rates (43%). In terms of weight, 18 percent of children were considered too wasted (thin) for their age, and 9 percent were considered severely wasted. Wasting was highest at 9–11 months, and was most severe in the northwest and northeast (NPC, 2013: 29, 33). As AIDS has become more prominent in Nigeria, AIDS prevention has become an important issue. Men more often than women recognize that condoms can reduce the spread of AIDS (74% compared to 58%). Despite this, the same survey showed that of men who had more than one sexual partner during the last year, usage rates were 4 percent for men under 25 years, 13 percent for those 25–29 years, 17 percent for those 30–39 years, and 23 percent for those 40–49 years; this indicates that those most likely to spread the disease have not been taking this necessary precaution. However, we must note that the situation is not as bad as it seems, because many of these involve men who are having intercourse with multiple wives, as having more than one wife is a preferred marriage practice in many Nigerian groups. Of the men who had had more than one partner in the last year, 80.8 percent were among men with more than one wife (NPC, 2013: 42–43).

General health care The Nigerian government spends comparatively little on health, education and social welfare compared to its revenue. Despite discussions on these issues since 2004, the government has not developed good programs to deal with these issues. Programs in Nigeria are the conditional cash transfer (CCT) In Care for the Poor (Cope), Maternal and Child Care (MCH) (which provides a health waiver for women and their children under five), and the Community Based Health Insurance Scheme. Various government agencies administer other programs without specific guidelines. Holmes et al. refer to these programs can as “ad hoc and uncoordinated” (2012: v, vi). In terms of vaccinations for major diseases, 25 percent of children aged 12–23 months had all their major vaccinations in 2013, an increase from 13 percent in 2003, although Nigeria’s goal was 90 percent by 2015. Polio has the highest vaccination rate of 77 percent for the first dose, and the lowest single vaccine was 38 percent for DPT (diphtheria, pertussis and tetanus). 183

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Again the northwest has the lowest rate of complete vaccinations (10%). A number of infants die from fever, acute respiratory infection (ARI) and dehydration from diarrhea in Nigeria. Only 35 percent of Nigerian children had received treatment for ARI. Children in the north central region are less likely to be treated for ARI symptoms, and those in urban areas are more likely to be treated than those in southern areas. Twenty-nine percent of children with diarrhea were taken in for treatment, with children in the northeast less likely to go for treatment. Oral rehydration for diarrhea rates were least among children under 6 months old (24%) and in the northeast (31%) (NPC, 2013: 23–26).

Child welfare Poverty has a direct relationship to child welfare as described in a study by Okpukpara and others. In the 1960s the Nigerian government passed laws to prohibit some types of child labor in Nigeria; however, the number of children working in Nigeria has increased, not decreased. And the number of street children has increased, following trends in others parts of Africa and the world. While scholars disagree about why this is happening, clearly child labor prevents many children from going to school and getting an education. The rate of schooling also differs by region. In the southern regions 89 percent of children were in school compared to only 74 percent in northern regions. Again the southeast looked best (97%), but it was worst in the case of the Northeast (63%). In terms of gender, more females (78%) than males (74%) attended school. While people dispute why this happens, more affluent families favor participation in full-time schooling to a greater degree. Studies show that parents of children who have never been to school cite poverty, the lack of a school in their area, and their children as being underage as the reasons they do not have children in school, with more people giving these reasons for excluding boys from school than girls. This study also shows that the most popular work tasks boys do are farming, hawking and fetching water, and the most popular work tasks girls do are getting water, domestic sweeping and hawking. Girls do more hawking than boys, while boys more often do activities such as bricklaying, laboring, scavenging, conducting buses, and load carrying. Regionally work is similar, except in the north boys more often engage in load carrying. Children drop out most often for “failure to pay fees” (22.1%) and poor performance (10.6%), but the study may have missed more significant reasons, because 34.84 percent said they had dropped out for other reasons than those listed on the questionnaire. Work conditions of child laborers vary, with 18 percent reporting a poor water supply, 16 percent reporting poor sanitation, 11 percent reporting being crowded and 10 percent reporting insufficient light. Physical problems reported by these child laborers include body pain (49%), tiredness (42%), and stomach problems (35%). There is a big difference in poverty level between the north and the south in failure to pay fees, with the north only 10 percent and the south 35.9 percent. Second, the high number of other answers indicates that one or more things not covered in the survey accounted for a significant number of dropouts.The final thing of significance is that there is a significant difference of 5 percent between those listing marriage for their reason as a reason for dropping out of school for females. The rate for females for this reason in the north was 9.7 percent while in the south it was only 1.4 percent. As would be expected, fewer children with more affluent parents drop out of school (Okpukpara et al., 2006: 3–5, 9–15). To deal with the problems of poverty preventing children from working, the Nigerian government set up the Universal Basic Education Program.While it began in 1999, it did not really begin to be implemented until 2004. Both federal and state governments fund this program. Because of this, now 9 out of 10 children who qualify for it attend school. However, we must 184

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also note that certain disadvantaged groups are excluded from the program and that school programs often remain poor. Gender parity has not been reached with these programs, although the government made this one of their goals. Boys consistently attend school at a 10 percent higher rate than girls, and this helps us to understand why the literacy rate of males 15–25 years is 82.5 percent, and 64.3 percent for females. Two non-governmental organizations (NGOs) which have helped Nigerian girls with education are the Ambassador’s Girl’s Scholarship Program (AGSP) and the Edo Girls’ Power Initiative. The first is a US government program administered by the US Agency for International Development (USAID). It provides scholarships and textbooks, helps improve teaching training and strengthens community involvement in education. It began in 2004 and provided help in 13 Nigerian states in 411 schools helping 9,149 students. Its scholarships had provided US$1.2 million to underprivileged African children. The second was founded by Bene Madunagu and Grace Osakue to educate girls 10–18 years about their “health, rights, self-reliance skills, and needs from a gender perspective through information, communication, counseling, and community intervention” (Umukoro, 2013: 314).

Commentary on the developing world Before going on to the special focus of this chapter, let’s look at some arguments Edwin Etieyibo makes about privatization. He says that many people in the third world feel that following Western models has not helped people in the world, particularly those models coming from the US. He writes (2011) that so far the effort to privatize social welfare in Nigeria by creditors such as the World Bank and International Monetary Fund (IMF) have encouraged have been unsuccessful, and in his opinion even if they had been successful they would be unjust. He argues that these approaches undermine the quality of life and well-being of Nigerians. In brief, he writes that 400 state-owned enterprises have been privatized to some degree, but they have had so many controversies and problems that many Nigerians consider the whole system a fraud. He argues that corrupt government officials make the program socially unjust because they use programs to channel money to themselves – that the program has only served some Nigerians, not all. Further, the system has thrown many Nigerians out of work in the public sector and, even though the services before were poor, they were far cheaper than what has happened as a result of privatization. These are issues which are often made against privatization in other countries (though not always with the corruption issue added in).

Special focus: establishing a social security system To begin this analysis of the current social security system of Nigeria, we need to understand that while presently the aged population in Nigeria is small in terms of percentages compared to the rest of the population, it is increasing in number and will continue to increase as more Nigerians live longer as they have better medical care. This makes it important to look at the aging population in terms of social security. At present the poorest people in Nigeria are the elderly, and for much of Nigeria’s history nobody even considered them when trying to find means to decrease poverty in the country (Ajomale, 2007). In the past social security in Nigeria rested with the extended family lineage which consisted of parents, grandparents, aunts, uncles, brothers and sisters, and various cousins. The extended family acted as a safety net which would take care of the needs of the elder population. Also the elder persons play roles as representatives of their family in larger councils. People saw them as sources of wisdom and guardians of morality. Members of many ethnic groups expected that 185

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younger people would take care of elder family members as they could do less and less to support themselves. However, in the present day the extended family plays a lesser role in society, particularly as more rural people have moved to the cities and have paid increased attention to the nuclear family. As has happened throughout the world, it now appears necessary for government to take over old-age security (Ajomale, 2007; Wahab, 2013: 235–237). Wahab conducted a study among one ethnic group, the Ijebu, to show what is happening to Nigerians in general. He picked them because “they are renowned industrialists and traders, who on account of this, have traveled widely, and therefore, are expected to retire to [their] hometown” (Wahab, 2013: 237). Wahab’s survey covered 810 elder Ijebu men and women. The discovery showed that over time their pensions became more and more irregular for the most elder persons. In rural areas women were more likely to receive a pension than men. And in terms of religion, Christians and people of traditional religions also had less regular pension help. Those with smaller numbers of children reported less regular pension help on average than those with more children. Civil servants also reported more irregular pension help (Wahab, 2013: 246–247). Wahab concluded from the study that, first, most people 60 years or older had no social security coverage; second, the system forces many people out of the job market when they reach 60 years at the same time when medical expenses have increased; third, while the urban elder persons stop working, rural elder persons continue to work, and if they work at hard labor this hurts their health; fourth, most of the elder persons are not prepared physically or economically for old age; fifth, the government only provides for the needs of a small percentage of the elder population; sixth, things like religion, occupation, education and location had significant effects on who received social security and who did not. Besides family members, other groups have started to step in to make people aware of the problems of the elder population and assist them in life. However, Nigeria has extremely few residential homes (around a dozen), but it has over 5 million elder persons. So these resources cannot begin to help the elder population in Nigeria. Nigerian Breweries set up the first private pension scheme for employees in Nigeria in 1954, and National Provident Fund (NPF) set up the first formal pension plan in 1961. In 1994 the government of Nigeria established the Nigerian Social Insurance Trust Fund (NSITF) and in July 1994 this took over for NPF. NSITF at the public level was a pay-as-you-go scheme which did not really provide enough for a person at retirement. At the private level NSITF oversaw the system. Funds were based on one’s basic salary, and pensions were arranged by banks and oil companies (Onyeonuru, Egharevba and Imhonopi, 2013: 4–5). Dostal (2010: 13) notes that this scheme had low pension payouts and high administrative costs. Also his analysis gave estimates that only 10 percent of Nigerians belonged to Nigeria’s formal economy, and of that 4.8 million, 3.7 million had a pension scheme. We can also look at Nigerian social security in terms of social protection. While Nigeria has a relatively high GDP, it spends only 0.9 percent of its GDP for social protection, less than Ethiopia, Malawi, Mozambique and Uganda, which each pay about 1.4 percent of their GDP each year (Umukoro, 2013: 318). The Nigerian government based the Pension Act of 2004 on the Chilean model of pensions in order to have most Nigerian employees have social protection by 2010. Chile had changed their pension scheme from a public defined benefit (PDB) to an individual defined program where each person contributed. Nigerian administers thought that by using this model they could get the same benefits as Chile had. The reasons they wanted to adopt the Chilean model were they thought that countries which had used the Chilean model had had great benefits from their reforms, Chile in the past had had similar circumstances to Nigeria, and it would 186

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improve Nigeria’s credibility in the world. However, the World Bank did not support their efforts because it had found out that the Chilean model had not worked as well as hoped, and that Nigeria needed other types of reforms before they could use the Chilean model (Casey and Dostal, 2008: 239, 241, 243, 257). Dostal argues that Nigeria made a mistake modeling its system on the Chilean model, and it learned lessons that were both outdated and not suitable for Nigeria in the long run. The World Bank abandoned the plan when it became clear it was simply a poverty pension. This made it necessary to use taxes to finance a social security system. This helps explain why the World Bank and IMF hardly helped with the Nigerian pension reform plan (Dostal, 2010: 14–15, 18) something which Barr and Diamond have shown to be inadequate (2009: 7, 13). Another criticism of the plan was that administrative costs of the program would be high (Casey and Dostal, 2008: 246, 253). The original goals of the pension scheme had four elements: to make sure everyone who worked would have retirement benefits; to encourage savings of people for their old age; to establish one uniform system with rules and regulations; and to fix problems in the older systems (Umukoro, 2013: 312). The Pension Act 2004 applied to employees in the public service of the Nigerian Federation, Federal Capital territory as well as employees for all private sector companies which had five or more employees. The Nigerian government designed it to have retirement benefits for workers in both the public and private sector. They also designed a uniform system to administer these retirement benefits. Different contributions were based on three categories: public service and Federal Capital employees would contribute at a minimum 7.5 cents per employee; military employees would have to contribute at a minimum 12.5 cents per employee, and all others in the program would contribute at a minimum 7.5 cents per employee. The National Pension Commission (NPC) would regulate the program, and its director would have 20 or more years’ experience working with either pensions or insurance. Besides this commission, Pension Fund Guardians (PFG) would bear responsibility for warehousing the assets from the pension funds. To be a Pension Fund Guardian, a company needed to be a limited liability company set up only to manage pension funds, and must have capital of at least N150,000,000 (which sum could be altered) (Dostal, 2010: 18–19; Onyeonuru et al., 2013: 5–6; Umukoro, 2013: 313). The strict requirements may have been based on problems found in Chile which later adopted stricter requirements. But while Nigeria included severe penalties for officials who did not act in a professional manner, the plan did not include the recommendation by the OECD to have a written statement outlining the investment strategies of the company (Casey and Dostal, 2008: 251–252). Aside from this, each of the 36 Nigerian states developed pension schemes for public officials that were non-contributionary and unfunded (Dostal, 2010: 17). Dostal notes that by 2010 the pension scheme had only registered 4.1 million people, not much better than the 2008 level of 3.8 million people, even though more Nigerians had entered the official workforce. He says that the slow growth of the system came because most people in the private sector were reluctant to take part in the new pension program, and because most of the Nigerian states refused to take part in it.The World Bank and IMF also had low estimates of how much the pension would repay, about 40 percent of final wages after 30 years of contributions. While low wage earners must pay full contributions, it is unclear how much they will receive for this, and nothing had been set up to pay the unpaid monies for pensions before 2004, which had reached a record high number by 2009 (Dostal, 2010: 17, 19). Sadly, the pensions designed to provide social security do very little for the people of Nigeria at present because it does not cover most of them, and most of those who are covered receive inadequate coverage. After 2007, the government put forth new ideas for policy called Vision 187

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2020. However, the Nigerian stock market crashed in 2008, so the financial situation of Nigeria became even worse than before, and the goals of the program have not succeeded.

Current and future trends of the Nigerian welfare state system It seems right to conclude by first quoting the remarks of Jörg Michael Dostal, writing about how the 2004 pension scheme has worked: None of the originally stated goals of Nigerian pension reform has been achieved so far. First, Nigeria continues to carry significant pension arrears from the pre-2004 unfunded pension system . . . Second, the post-2004 funded pension system has not had any significant impact on the development of Nigerian financial markets, since most of the assets are held in government securities and domestic money instruments. It is therefore funded in only the most narrow sense, due to a lack of other appropriate investment outlets . . . Third Nigeria’s macroeconomic credibility had declined . . . Overall the regulatory environment has failed to encourage interaction between pension reform, while problems of regulation within the new system such as the lack of transparency of PFAs about their investment returns and fees, have also called the credibility of the reform into question . . . Most importantly, the 2004 reform has failed to allow for coverage of workers outside the formal sector of employment . . . It only caters to the needs of workers in the formal employment sector, and it does that poorly. (Dostal, 2010: 32–33) Dostal suggests that in order to make the system work Nigeria needs to increase coverage rates and set up a system of redistribution. He suggested looking at other sub-Saharan African countries with similar economic problems of Nigeria to see how they are dealing with social security issues. Casey and Dostal (2008: 259–260) suggested replacing the system with a social pension system which would address some problems, although they said it would not solve one problem: the danger of payments being made too late. Onyeonuru, Egharevba and Imhonopi (2013) suggest that adopting a better system will still not work in Nigeria until Nigeria has become a successful nation state.

Summary and conclusion Nigeria has many problems to develop a successful national program of social welfare. Foremost on this list is the corruption of Nigerian government. Without dealing with corruption, no social program, however well designed, will likely succeed in Nigeria. Aside from this issue of corruption other obstacles to effective welfare include its diverse population, religious divisions and regional divisions. The diversity problems in the nation stem in large part from colonialism which forced on the people of Nigeria a unity of diverse groups which had historically not formed a political entity in the past. Oil has made the country wealthy, but has not developed other industries, and provided an impetus for corruption and division in the country. As a result many have described it as a failing state and a failed state. In terms of the issues looked at here, Nigeria’s welfare state has not done very well. The greatest success Nigeria has had is in poverty reduction in terms of percentages; however, despite this most say the number of people in poverty is increasing because the population is increasing so fast. Also certain parts of the country are doing significantly better in this area than others. Maternal health has also improved, although as with many other social welfare issues, it appears 188

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to be much better in the southeast of the country, and much worse in the northwestern part. Child health is quite dismal, with the result of a high percentage of short and underweight children, an issue directly related to the high number of children who have inadequate nutrition. While AIDS is less serious in terms of percentages than some African countries, many feel that it soon will have more people with AIDS than any other African country. Because the Nigerian government spends little money on health, education and social welfare compared to its income, all of these things have suffered. While the percent of children receiving vaccinations has increased, it is far below the goals the Nigerian government has set for them. Besides inadequate medical care, many children end up working in the labor market, preventing them from receiving a complete education, and resulting in many of them having physical problems. Nigeria is the tragedy which has faced many African nations at present, where a few people in government take the bulk of wealth for themselves, thus depriving most people from the fruits of economic and social benefits. As for the social security system, which we saw in more detail, the system was based on the Chilean model (described by Sylvia Borzutzky and Mark Hyde, in chapter 8, this volume), and it has failed to provide adequate social security to the aging population of Nigeria either in the formal or informal economy. That is the current state of social welfare in the country. While a new welfare policy is needed, some have suggested any policy, even a policy better than what has been used before, will probably not work in Nigeria unless the policy deals not only with a better model, but with the issues of corruption in the country and with the social divisions within Nigeria.

References Adesoji, A. (2010), The Boko Haram Uprising and Islamic Revivalism in Nigeria, Africa Spectrum, Vol.  45, No. 2, pp. 95–108. Ajomale, O. (2007), Country Report: Ageing in Nigeria – Current State, Social and Economic Implications, in A. Hoff (ed.), Summer Newsletter 2007 of the Research Committee (RC11) on the Sociology of Ageing of the International Sociological Association (ISA), Oxford Institute of Ageing: Oxford. Barr, N. and Diamond, P. (2009), Reforming Pensions: Principles, Analytical Errors and Policy Directions, International Social Security Review,Vol. 62, No. 2, pp. 5–29. Campbell, J. (2011), Nigeria: Dancing on the Brink, Rowan and Littlefield: New York. Casey, B. H. and Dostal, J. M. (2008), Pension Reform in Nigeria, Social Global Policy, Vol. 8, No. 2, pp. 238–266. Dostal, J. M. (2010), Nigerian Pension Reform 2004–2010: Great Leap or Inappropriate Policy Design, Korean Journal of Policy Studies,Vol. 25, No. 2, pp. 13–37. Ejiogu, E. C. (2011), The Roots of Political Instability in Nigeria: Political Evaluation and Development in the Niger Basin, Ashgate: Surrey. Ewhrudjakpor, C. (2005), Poverty and Its Alleviation:The Nigerian Experience, International Journal of Social Work,Vol. 51, No. 4, pp. 519–531. Falola, T. and Heaton, M. M. (2008), A History of Nigeria, Cambridge University Press: New York. Fund for Peace (2011), The Failed State Index, Fund for Peace: Washington DC. GN, Government of Nigeria (2010), MDG Report 2010: Nigeria Development Goals, Government of Nigeria: Abuja. Hill, J. (2012), Nigeria Since Independence: Forever Fragile? Palgrave Macmillan: New York. Holmes, R.; Akinrimisi, B.; Moran, J., and Buck, R. (2012), Social Protection in Nigeria: Mapping Programmes and Their Effectiveness, Overseas Development Institute: London. Lewis, Peter M. (2006), The Dysfunctional State of Nigeria, in N. Birdsall, M. Vaishnav and R. L. Ayres (eds.), Short of the Goal: U.S. Policy and Poorly Performing States, Center for Global Development, Washington DC, pp. 83–116. 189

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NPC, National Population Commission, Government of Nigeria (2013), Nigeria Demographic and Health Survey 2013, Measure DHS ISEE International: Calverton MD. Okonjo-Iweala, N. (2012), Reforming the Unreformable: Lessons from Nigeria,The MIT Press: Cambridge, MA. Okpukpara, C. B., Paul, C., Fidelis, N.O.U., and Chukwuone, N. (2006), Child Welfare and Poverty in Nigeria, paper presented at Poverty Phase II Dissemination Workshop, Addis Ababa, Ethiopia, October 12–13. Onyeonuru, I.; Egharevba, M., and Imhonopi, D. (2013), Social Policy and the Retrenchment of Welfares States in Nigeria, Developing Country Studies,Vol. 3, No. 10, pp. 1–10. Osheolo, S. (2010), Galloping Poverty in Nigeria: An Appraisal of Government Interventionist Policies, Journal of Sustainable Development in Africa,Vol. 12, No. 6, pp. 264–274. Severino, J. M. and Ray, O. (2011), Africa’s Moment, Policy: Madden, MA. Umukoro, N. (2013), Poverty and Social Protection in Nigeria, Journal of Developing Societies,Vol. 29, No. 3, pp. 305–322. UN, United Nations (2013), World Population Prospects: The 2012 Revision, http://www.prb.org/Publica tions/Articles/2013/un-world-projections.aspx. Wahab, E. (2013), Pension Challenges Facing Older Persons in Nigeria, European Scientific Journal, Vol. 9, No. 9, pp. 235–251. WB, World Bank (2013), Nigeria Economic Report, May, No. 1.

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11 The UK welfare state system With special reference to the mental health care system Paul Taylor and Jason L. Powell

This chapter explores the welfare state system in the UK.We critically review its historiography, major institutions and contemporary issues relating to its sustainability. We draw out one feature of the welfare state via an in depth case study: its mental health care system focusing from the legacy of Thatcherism to the present. From the 1970s onwards the post-World War II welfare state in the UK was thrown into question.The final quarter of the 20th century had often been captured as the epoch of the crisis of the welfare state (Powell, 2014). The guarantees of the welfare state, long-term growth and affluence, it was argued, had led to a permissiveness, overburdened democracy and inflationary tendencies associated with Keynesian demand management (Phillipson, 1998). Since the 1980s keywords in the political debate became “vulnerability,” “fiscal overload,” “ungovernability” and “unsustainability” (Phillipson, 2013). In the 1990s, with levels of unemployment hovering around 10 percent in a majority of European political economies including the UK, the “prospect for survival” of the welfare state was recognized as problematic (Cook et al., 2015). The reason is very much related to welfare reforms tied to neoliberalism. For example, through the 1980s and into the 1990s, the UK’s health care system endured welfare reforms inspired by a wave of neoliberalism that intoxicated policy makers and their advisors. This “health reform” era saw health care systems subject to radical change. The preceding post-war era was marked by welfare policies intended to build civil society and expand service coverage, for example, by building hospitals (National Health Service, or NHS) and creating government infrastructure to administer public health care funding and service delivery. Such arrangements tended to include central planning and administration of health systems, and leadership at the service delivery level by medical and other health professionals within the “welfare state.” We begin our discussion by contextualizing the emergence and consolidation of the welfare state in Great Britain through the political drive of William Beveridge.

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Beveridge and British welfare state system The welfare state is the largest institution of government. The ethos of the welfare state was motivated by the findings of the Beveridge Report (1942), which argued for a support system for the vulnerable groups in society (Phillipson, 1998). Powell et al. (2002: 29) state: The Beveridge Report of 1942 is often seen as a historical moment of wartime reconstruction and the blueprint of the welfare state. Hence, the defining feature of the post-war welfare state is of social protection, which came to be firmly anchored on the explicit normative commitment to grant social rights to citizens in areas of human need (Phillipson, 2013). This implied the expansion of mass education as an instrument for equal opportunities, access to high quality health care for everyone, together with the introduction of a universal right to real income, in the words T. H. Marshall’s seminal work, Citizenship and Social Class (1950), “not proportionate to the market value of the claimant.” Social citizenship held out a promise of the enlargement, enrichment and equalization of people’s “life chances” (Marshall, 1950: 110, quoted in Powell, 2014: 44). Marshall thus defined social welfare as the use of democratic political power to supersede, supplement or modify operations of the economic system in order to achieve results which the economic system would not achieve of its own (Powell, 2014). In his first report, Social Insurance and Allied Services, Lord Beveridge saw “freedom from want” to the be the pivotal objective of the welfare state (Phillipson, 2013). In his 1945 Full Employment in a Free Society, however, Beveridge came to view employment, active participation or inclusion in productive work as a key function of being an accepted part of a larger collective identity (Phillipson, 2013). In Beveridge’s participatory view on full employment, social citizenship went beyond the right to a decent income, to include the right to live from labor, to combine their income with the recognition of a social function. It has been argued by the main political parties that the welfare state must be “free at the point of delivery” (Phillipson, 2013: 43). The Beveridge Report of 1942 proposed a system of national insurance, based on three “assumptions”: family allowances, a national health service and full employment (Walker, 1996). This became a major political issue, with both Labour and Conservative parties committed to its introduction (Cook et al., 2015). During the war, the coalition government also committed itself to full employment through Keynesian economics, pensions, free universal secondary education and the introduction of family allowances (Hills, 1993). The Labour Government was elected in 1945, and introduced three key Acts: 1 The 1946 National Insurance Act, which implemented the Beveridge scheme for social security; 2 The National Health Service Act 1946; 3 The 1948 National Assistance Act, which abolished the Poor Law while making provision for welfare services (Phillipson, 1998). These acts were timed to come into force on the same day, June 7, 1948. The key elements of the “welfare state” were understood as being social security, health, housing, education, and welfare and children (the “personal social services”). Contemporary arguments emphasized the inter-related nature of these services and the importance of each for the others. However, the administrative division between services was reinforced by reactions against the unifying and 192

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all-embracing nature of the Poor Law, which led to a strong distinction being made between income maintenance, health and welfare services (Hills, 1993). The welfare state was not intended to respond to poverty; that was what the Poor Law had done (Phillipson, 1998). The main purpose was to encourage the provision of the social services on the same basis as the public services – roads, libraries and so forth – an institutional model of welfare (Hills, 1993). In 1944, the government formally committed itself to the maintenance of full employment through Keynesian welfare policies.The economy was seen as vulnerable to the trade cycle, fluctuations in economic development which arose because different sectors of industry were out of phase with each other (Cook and Halsall, 2011). To achieve stable growth, governments had to encourage spending during slumps and discourage it during economic booms. This stabilization was not particularly successful. In part, this was because governments lacked the ability to respond precisely and at the appropriate times; in part, too, no government wished to damp down a boom. The problem was known in the 1950s as “stop go.” However, virtually full employment was maintained, with little inflation, throughout the period when Keynesian welfare policies were operated (Phillipson, 1998). Perhaps more important, certain problems in the British economy were obvious by the late 1950s. Britain was growing more slowly than any of its competitors. It was over-reliant on the “old staples” – coal, cotton and heavy engineering which were inefficient, outdated and producing goods with little appeal to consumers. The Wilson government, 1964–1970, attempted to change the balance through economic planning (Hills, 1993). The Heath government, beginning in 1970, proposed a program which contained many of the elements of what is now called “Thatcherism,” including a refusal to support industries that were labeled as “lame ducks” (Hills, 1993). However, convinced that traditional Keynesianism did not work, the government attempted a “rush for growth” and flooded the economy with money.The conventional Keynesian analysis suggested that this would stimulate the economy to some degree, but production would not be able to keep up, causing inflation, and the money would be spent abroad on consumer goods. Without the world oil crisis, there would still have been the largest balance of payments deficit to that date (Phillipson, 1998). The mid-1970s were consequently marked by retrenchment and “cuts,” although many were cuts in expected growth rather than in actual expenditure (Hills, 1993). The government apparatus for control, devised during a period of expansion, was turned to the reduction of expenditure. The Conservative government elected in 1979 undertook to deal with Britain’s fundamental economic problem – its over-reliance on outdated industry. This was to be done through the market, and the decision was taken to take measures which exacerbated the depression, rather than counter-cyclical measures. Manufacturing industry bore the brunt, with massive unemployment as a direct result. Unemployment more than tripled, from 1 million to over 3 million on the official figures, and there was a major shift out of the manufacturing industries. Many local economies have never recovered (Cook et al., 2015). The period of the 1950s and 1960s also coincided with recognition of the importance of long-term demographic change, with a range of associated issues now placed within the framework of what came to be viewed as a “welfare state for older people” (Phillipson, 1998). In the post-war period or up until the economic crisis of the early 1970s, old age was constructed through the pathways provided by organized capitalism. Modernity created the conditions, through social reforms, for the creation of a “standardized” old age, the end phase of a structured life course divided into periods of education, work and leisure. Phillipson (1998) makes the point that the story of aging over the past decade or so 193

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has unquestionably been the unraveling of the welfare institutions closely associated with modernity, and not least those intimately connected with the lives of older people. One way of understanding social changes since the early 1970s has been presented by Young (1999: 6) in the following way: The transition from modernity to late modernity can be seen as a movement from an inclusive to an exclusive society. That is from a society whose accent was on assimilation and incorporation to one that separates and excludes. This erosion of the inclusive world . . . involved processes of disaggregation both in the sphere of community (the rise of individualism) and the sphere of work (transformation of . . . labour markets). Both processes are the result of market forces and their transformation by the human actors involved. Coupled with this, the movement from “inclusion” to “exclusion” from the early 1970s posed a major challenge to different social groups in the British welfare state – older people were one, but others were also affected – who had moved out of the labor force and who became vulnerable to the charge of being a “burden” on society through social welfare (Powell, 2014). This partly explains the rise of ageism during the 1970s and 1980s, but more general tensions were illustrated in debates which presented older people as a “selfish welfare generation,” with the resulting possibility of “intergenerational conflict” or “workers” in potential conflict with “pensioners” (Phillipson, 1998). The administration of the welfare state has undergone two major reforms since its inception. The first phase, covering the 1960s and 1970s, saw central government reformed in order to allow the planning and control of public expenditure by the Treasury. The aims of this reform were managerial efficiency and economic planning. The effect was to create a system in which the Treasury allocated resources to departments, and departments to services (Phillipson, 1998). The second phase, which led in the 1980s and 1990s to restructuring of the civil service and the administration of welfare, was called the “new public management” (Powell, 2014). It has three main elements: 1

2 3

The breakup of the administration into agencies, so that the efficiency of each part of the administration can be assessed individually. Examples are NHS trusts and the administrative agencies responsible for Social Security. The introduction of management with managers being responsible for running agencies in a business-like fashion; this is widespread in health and personal social services. Quasi-markets. Public services are required to act more like economic markets, with the separation of purchasing and provision of services and the introduction of competition.The trend is strongest in health and social care (Cook et al., 2015).

From the 1980s a state emerged based upon minimal intervention and regulation via a rolling program of privatization, deregulation and contraction of services. For example, within the mixed economy of welfare, there has been the social construction of a market-oriented, consumer-based approach to the delivery of welfare and the role of older people as consumer pensioners. Yet, despite ambitious claims for the virtues of the market, the proportion of working-age people in the UK saving for their retirement actually declined over the period from 1999–2000 to 2005–2006 (Phillipson, 2013). This reflects the long-term fall in occupational pension provision, yet to be offset by the growth of personal pensions (Peston, 2008). Seventy percent of final salary schemes in the UK are now closed to new employees, compared with just 17 percent in 2001 (Phillipson, 2013). Robert Peston’s summary of the 194

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pensions’ crisis bears all the hallmarks of the characteristics of “disorganized capitalism” in its post-industrial phase: What has happened to corporate pensions funds reflects a change in the culture of the UK, the abandonment of the notion that companies have a moral obligation to promote the welfare of their employees after a lifetime of service. It is part and parcel of the death of paternalism and the rise of individualism. Company directors are no longer asking what it cost them to provide a comfortable retirement for staff. Instead, the majority of big companies are investigating the price of ridding themselves of any responsibility for their retired workforce. This is a less conspicuous but hugely important example of how the wealth of the many is being eroded, while that of the super-rich has soared. (Peston, 2008: 255) As Powell (2014) claims, the state is being reorganized to include a retention of a strong center to formulate policy but the dissemination of responsibility for policy implementation to a wide range of private, public and informal modes. More specifically, Alan Walker (1996) and Chris Phillipson (1998) in the UK have claimed that a “demographic threat” is being used as an ideological platform for a more general neoliberal attack on the welfare state in favor of both private insurance and greater personal responsibility for our own futures. What Walker calls the ideology of “familism” played an important role in the Thatcher government’s emphasis on personal responsibility for our families and their futures. As state support for welfare has been systematically eroded, there is a greater potential burden on family members to provide familial care, but in reality it is difficult for family members to undertake responsibility for older people because the notion of “family” itself has been changing dramatically. With high levels of divorce, increasing longevity and greater geographical mobility, families are often too fragmented and diverse to provide the care that occurred between children and parents in the traditional (extended) family. As life expectancy increases, families may often contain two generations of pensioners who need support. Walker (1996: 35) concludes by noting that although “age-group conflicts have the potential for greater prominence in the decades to come,” whether or not such conflicts will be significant depends on how the state functions to enhance or undermine the capacity of individuals to provide care and support for family members. Further,Thatcher’s policy of privatization of social and health care resulted in a shift of social responsibility for the “dependent elder persons” from the formal to informal sector of care. While the private sphere of the family has an important role to play, this should not be used to justify the passivity of the state in its public and formal role (Powell, 2014). Furthermore, the burden of care tends to fall unequally on female members of the family, thereby reinforcing gender inequalities. Hence, the UK has a neoliberal system of government. The case of health care illustrates this. As Ham notes, there were essentially three components of the neoliberal approach when applied to health care (Ham, 1997: 8–9). First was that health systems required the forces of private markets to improve their efficiency and increase the range of services available. Driving this was a belief that central planners were incapable of producing ideas for health system improvement. The UK government had a preference for markets, public sector downsizing and privatization.The preference for markets saw the creation of a split between health care purchasers and providers, and introduction of contracting between these two parties, within previously integrated hierarchical health systems. Of course, in tandem with the purchaser-provider split, the UK reformed the organization of health care delivery.This included creating new corporate 195

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structures to manage hospitals and requirements that publicly owned and/or funded agencies compete with one another (Ham, 1997). Second, in keeping with “managerialism” was a desire to implement robust health care services management systems. This was propelled by perceptions that health care professionals lacked appropriate expertise in management, such as experience in running private business, and were incapable of making objective managerial decisions due to their allegiances with professional colleagues. Improved management also required an orientation towards “customers,” dedication to improved service performance through developing workforce objectives and incentives and devolving responsibility for these to appropriate units, and a focus on contracting out of services to induce competition and reduce costs (Powell, 2014). Crucially, it required a concerted effort to improve performances in areas such as hospital average length of stay, waiting times for elective treatments, and health outcomes. To empower and provide incentives for improved hospital and other local service management, such responsibilities were decentralized (Ham, 1997). This meant that budgetary, human resource and service organization decisions were a managerial responsibility and largely separate from central government intervention – a tenet of neoliberalism that Margaret Thatcher arguably instigated against health care in the British welfare state. Third was the reform of budgetary systems and creation of financial incentives to improve performance. A core idea, applied across government systems, was that funding ought to be oriented towards “outputs and outcomes” instead of simply based on prior expenditure and utilization patterns. Thus, policy makers required that providers develop information systems as well as methods for micro-managing workforce activities. This was so that funders (or purchasers) would be able to see exactly what they were paying for.They would also be able to see how these activities were contributing to desired policy outcomes (long-term health policy objectives) (Ham, 1997).

The mental health care system in the UK The Conservative government installed in 1979 with Margaret Thatcher as prime minister vowed to address the political, social and economic problems the welfare state was alleged to have caused. In what Stuart Hall (1979) describes as “authoritarian populism” Thatcher was able to mobilize support for hardline policies through presenting the crises of Labour socialism. Thatcher’s propositions of what the faults of society were, and how to rectify them, were appealing to the anxieties of many. Attacks on immigrants and immigration, the synthesis of national economic problems and welfare costs, and the promise to tackle perceived excessive trade union power were all tantamount to an approach that attempted to structure a binary public imagination of “good” and “evil.” The creation of deviant caricatures based on social circumstances and background rested on the demonstrating of an incongruousness of values did little for any sympathetic view of the mentally ill, who had already existed on the fringes of society. Indeed, this view was provided with a further scaffold with the passing of the Mental Health Act 1983, which resisted opportunities to enhance the rights of patients, instead favoring the developing more sophistication in mechanisms for involuntary treatment and an expansion of control professionals. Thatcher’s aim to reduce public expenditure saw several attacks on welfare provision as well as providing little opportunity to effectively finance health care initiatives due to the diversion of funding to other specialties such as primary care (Mechanic, 1995). Cuts to individual benefits and a transfer of controls over payments to local authorities (housing benefit) and employers (sick pay) began in the early 1980s. The means of growth was seen as a mission of duality: gain 196

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control over inflation and enhance levels of individual responsibility. The promotion of schemes for home ownership cast those tenants in local authority accommodation as less virtuous, not least where the “peripheral problem council estate” was sold as generative of dependency on the state and criminogenic. Despite unemployment reaching 3 million in Thatcher’s first term in office, and inflation remaining steady at 22 percent, policy remained staunchly focused on hard-line politics of contraction in public spending on welfare (e.g. child benefit frozen, Housing Act 1980 statutory “right to buy” for tenants of council properties) and statutory mental health services. The hollowing-out of the social security system could be seen further in Thatcher’s failed attempts to privatize the NHS and higher education during the 1980s. However, Thatcher’s second and third terms in office saw further revisions to welfare payments and eligible claimants, with means-tested benefits being normalized in addition to the abolition of free vision and dental checks (1989). Thatcher’s determination to quash the specter of dependence is captured in her 1987 remarks in a magazine interview in Women’s Own: I think we have gone through a period when too many children and people have been given to understand “I have a problem, it is the Government’s job to cope with it!” or “I have a problem, I will go and get a grant to cope with it!” “I am homeless, the Government must house me!” and so they are casting their problems on society and who is society? There is no such thing! There are individual men and women, and there are families. (Thatcher, 1987: 10) The general pursuit of public spending reduction (and individual benefit reforms) meant that public services to support mental health care in the community suffered accordingly. As Boardman (2005) asserts, mental health services at this transitional point (between hospital and community) were drastically underfinanced and understaffed. The beginning of the last decade of the 20th century began with the passing of the NHS and Community Care Act 1990.The implementation which took place over the next 3 years placed a legal duty on health authorities and local social services to devise needs-based care plans for psychiatric patients in the community (Thornicroft, 1994). The intention here was to combat inappropriate resourcing and to require tailored packages of support and care based on assessment to be applied to individual cases. This was a monumental step amid continuing constraints on resourcing and one which organizations such as the Mental Health Foundation (1994) were acutely aware of. Reviews of personal welfare benefits were also being undertaken at the same time. In 1992, the Disability Living Allowance (DLA) replaced Mobility Allowance in a bid to improve monetary conditions for those eligible in order to assist. As Burchard (1999: 6) explains, “the lowest rates became payable to those with fewer but nevertheless significant requirements, and the highest rates were made more generous than those of its forerunners.” An Incapacity Benefit was introduced in 1995, replacing Invalidity Benefit. However this reform carried stricter eligibility criteria and was also subject to taxation than its forerunner. Social exclusion, trans-institutionalization (i.e. in the context of large numbers of remand and sentenced prisoners suffering mental illness and disorder – see Konrad, 2002), homelessness and poverty are just some of the circulating issues surrounding agendas of care in the British welfare system. The observance and wrangling of such issues largely remained in the domain of policy writers, academics and campaigners. However, challenges in the effectiveness of community care were brought into full public view through a number of instances of patient-perpetrated homicides.The 1990s forced politicians to confront issues of resourcing and the whole ideology of health care. 197

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Concerns over health care arrangements were largely twofold. First, policy was too welfaristic at the cost of public safety (Burns and Priebe, 1999), and second, inadequate resourcing precluded effective management. Public apologies by politicians were made amid pressures to radically and immediately reform the community care agenda; however, the policy of community care remained despite condemnation of mental health services. The passing of the Mental Health (Patients in the Community) Act 1995 aimed to strengthen monitoring through Supervised Discharge Orders but at the same time acquired criticisms of anti-therapeutic responses being deployed and an imbalance between therapeutic intervention and anti-therapeutic control (Eastman, 1995).

Mental health and welfare policy: into the new millennium A change in government came in 1997, with New Labour winning the general election with a landslide of 179 Parliamentary seats. In response to a continuation of concerns over the quality and breadth of mental health services in the community, the NHS Plan, launched in 2000, proposed the commissioning of new national community services that would deal with mental health crises, intervene earlier, and assertively manage illness and disorder in the community context. Actuarial discourses were a pronounced feature of much Labour government policy from 1997 onwards. This was not designated solely to mental health services, on the contrary; rather the Labour government proposed policies that would reach into a variety of institutions and contexts that aimed to govern problem behaviors before they happened. The management of future “risky” behavior was the order of the day, with substantial revisions made to youth and community projects and services and the criminal justice system broadly. Mental health services and legislation also became increasing built around controls informed by a predictive logic. The New Labour government also set about influencing attitudinal reform to welfare benefits. Principles of “workfare” rather than “welfare” reverberated through the Labour years of 1997 to 2010. The notion that welfare provision should facilitate a leap into the labor market rather than an insurance against unemployment maintained its currency, with key political figures outlining that the best welfare for working age people is work itself (Social Security Secretary Harriet Harman, May 6, 1997). Skepticism and concern of such a tone can be found among the scholarship of authors such as Bauman (2004), who argue that the presence of an undercurrent such as this is at odds with the very concept of the welfare state as originally set out. Narratives of workfare were applied universally and without discrimination in an attempt to instill a new social contract between the individual and the state and to force a cultural shift from benefits and dependence to labor and independence. Active systems of testing and review for claimants were installed in place of what were considered as lackadaisical passive systems of claimant acceptance and subsequent benefit payment. The New Labour government’s entry into power, and its developing values and beliefs on welfare, posed several challenges for claimants enduring mental ill health. High numbers of Incapacity Benefit and Disability Living Allowance claimants did so because of mental illness. This group, already stigmatized by virtue of psychiatric diagnostic labels and the misrepresentation of continued causal relationships of mental illness and dangerousness, faced increased public and official attention for the welfare benefits being claimed. The mentally disordered individual is therefore doubly deviant: first because of their medicalized identity, and second because of their identity as a (potentially undeserving) welfare claimant. The second point may not have been so relevant had the cultural shifts not taken place to illuminate and tackle the perceived 198

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burden of claimants standing in the way of increasing economic activity of society and abdicating responsibility. Approaching welfare reforms in this way has the potential to designate lower socio-economic groups as welfare “scroungers” and undeserving. Tougher thresholds of acceptance onto welfare benefits and a shorter period of time in receipt of them may also be considered as a punitive measure against those who are the least well-off. Popular representations of the deserving and undeserving claimant have woven their way through tabloid imagery and political oratory and thus contemporary parlance on benefits, and who should claim can dominate readings of the situation through the creation of normative social scripts. The problem for the claimant that endures mental illness or disorder is twofold: first that a high number of people with mental illness experience poverty, and second how well accepted (in official and public observations) are psychiatric conditions as a legitimate claim. Those individuals on low incomes or who suffer poverty are more likely to experience poor mental health (Stafford and Marmot, 2003; Fone and Dunstan, 2006). Moreover, the presence of mental illness or disorder creates barriers to gaining and sustaining employment, and thus makes those with mental illness more likely to enter unemployment that then affects their financial position. In such circumstances welfare payments are a primary source of financial support. Moreover, not all mental illnesses and disorders are viewed the same, and whether a condition is observed as a legitimate or illegitimate claim for benefits is subject to the nature and character of testing thresholds that change over time. The deserving and undeserving mentally ill are likely to be classified not on the basis of their presenting symptoms, but rather in a context that is heavily shaped by political imperatives concerned with welfare reforms (i.e. workfare) and fiscal policy.

Mental health and welfare: coalition responses The coalition government (Conservative and Liberal Democrats) formed in the general election of 2010. Discourses of austerity prevailed, with a series of cuts in spending put forward, none more so than what was tantamount to a radical and fundamental change to the welfare state. Fiscal tightening on public spending and welfare support came in a variety of forms including the introduction of the “bedroom” tax, the Disability Living Allowance being replaced with a Personal Independence Credit, the introduction of Universal Credit and a welfare benefit cap. Attempts to gain consent for policies of welfare contraction were done so through the discourse of austerity. Here, poverty and unemployment are argued to be the fault of previous governments’ creation of a culture of dependency, an over-generous welfare system that consequently ends with a rise in public debt. Such arguments are nothing new, indeed the Thatcher government proclaimed similar “truths,” however at this time a narrative of urgency and immediate action (virtuous necessity) was stronger due to the economic crisis. In 2011–2012, the sick and disabled were the fourth-largest group (15.5%) of welfare expenditure after elder persons (42.3%), those on low incomes (20.8%) and families (18.4%) (Reid, 2013). Tacking the perceived excesses of dependency among welfare claimants and the creation of a discursive strategy is evident according to authors such as Wiggan (2012), continuing the language of welfare that New Labour had developed. Similarly cuts to public spending on mental health care had taken place over the coalition Parliament. In a study conducted by BBC News and the journal Community Care, amid referrals to community mental health services increasing by some 20 percent, NHS Mental Health Trusts in England have seen their budgets fall by more than 8 percent over the coalition’s term in office. Concerns over the impact 199

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of rising referrals to mental health services and contraction of staffing and services undoubtedly impact on outcomes for people with mental illnesses and disorders (KF, 2015).

Current and future issues for the welfare state system Current issues illustrate that the British welfare state has many different functions, such as the National Health Service (NHS), housing, disability, pensions and income support. The welfare state in contemporary Britain is bringing “together a number of agencies and institutions to deliver a sustainable social welfare programme” (Cook and Halsall, 2011: 21). Moreover, the welfare state is publicly funded, and recent political debates have focused on the investment in key services and on delivery. The broad political consensus that has shaped welfare policy in Britain for most of the postwar period is now undergoing significant change. There is a shift from an inclusive welfare state to what has been termed a workfare state where benefits are being restricted and capped, as well as linked to the search for work. According to the Institute for Innovation and Improvement (2015), the NHS is the fourth largest organization in the world, with 1.3 million people working for the service within a £100 billion budget. The NHS was launched on July 5, 1948, by Aneurin Bevan, the then Minister of Health. This institution has three core principles: (1) “that it meets the needs of everyone”; (2) “that it be free at the point of delivery”; and (3) “that it is based on clinical need, not ability to pay” (NHS, 2015). Throughout the 1980s to the present day there has been much political discourse on how the welfare state is run and how much it costs. Since the election of a Conservative government in 1979 which ran to 1997; a Labour government from 1997 to 2010; and the current coalition government, the debate has focused on privatization. Klein (1995: 154) has noted that privatization in the political arena has always caused a “longevity” argument and provokes “traditional reactions.” Both the Conservative party and the Labour party have privatized parts of the NHS in the past. The principle behind this is to improve the service. The future question here is if consecutive governments keep privatizing the NHS, will the service experience improvements? There are a number of current issues that require key challenges to the welfare state in the UK: 1

2

3

4

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There is the future relationship between restructuring welfare and health and social care resources: the relationship between social care and wider social and economic benefits with a scope to view the reform of adult social care not as an end in itself, but as a form of social and economic investment in local communities which can create new employment and business opportunities (Phillipson, 2013). The British welfare state’s future relationship with the health service is central, including the need to develop a shared vision for community services, the need to make best use of scarce public resources and the need for more joint approaches to supporting people with very complex needs (Powell, 2014). The relationship between the local and the national, with a constructive two-way dialogue needed between current debates about a more national settlement for adult health care on the one hand and the need for innovative local solutions on the other. Overall, there are major future opportunities to refocus the adult health care system and to work much more creatively with social capital and community resources. However, the risk is that the severity of the challenges facing local government prevent the careful thinking, time and investment needed to produce genuine, long-term solutions for the welfare state (Phillipson, 2013).

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Conclusions With special reference to the mental health system, as we have seen, the linkages between poverty and mental health are well known. This poverty may be generational, and barriers to employment due to the presence of mental ill-health may exist for many. Indeed gaining and keeping employment for the mentally ill can be especially difficult due to stigmatization and myopic views of what exactly mental health conditions are and are not. Where barriers to employment are not overcome, a return to benefit claims may be required. This may be temporary or more permanent, however, if employability is contingent on “good” levels of mental health, then access to work is contingent on the quality and availability of services to support and treat conditions. As we have seen across governments, mental health services have been the recipient of discriminatory funding and an overall minimal resourcing.The lower status of mental health services against other medical specialties has hampered its development and growth, and this has therefore impacted on service users. Political agendas have sought to increase labor market attachment and reduce welfare claimants. Labor market attachment therefore comes to represent social inclusion, and the benefitclaiming mentally ill, who are already socially excluded through their medicalized identities, are further excluded. Priorities of “workfare” rather than “welfare” rest then, in this case, on access to mental health services, and the risk of not fulfilling the “good neoliberal citizen” who is employed is ever too real. Those remaining as welfare claimants, and who cannot fulfill the aims of welfare-to-work strategies, succumb to greater hardship (which can exacerbate existing mental health conditions) where cuts to benefit payments take place. The circumstances explained here point to those with mental health conditions being in receipt of (dwindling) welfare payments for a longer period of time than perhaps others who are able to engage in work programs. The popular use of imagery and rhetoric that cast the benefit claimant as “scroungers” and undeserving enhances stigmatization and reinforces social marginalization in the British welfare state. Such conditions leave the mentally ill vulnerable to a plurality of social exclusion. Not only are sufferers depicted as undeserving due to their lack of labor conformity, but this is set against the persistent stigmatization and prejudices that those with mental illness endure. Indisputably the creation of identities that are doubly deviant has a deleterious effect. At the same time many that do, or require access to, mental health services are dependent on welfare benefit payments. Their situation is precarious, as we have shown, and there appears to be little sign of the situation improving. The contemporary theme of austerity serves to legitimize a “hollowing-out” of welfare provision and public services in Great Britain.

References Bauman, Z. (2004), Work, Consumerism and the New Poor, McGraw-Hill: Milton Keynes. Boardman, J. (1985), New Services for Old: An Overview of Mental Health Policy, in A. Bell and P. Lindley (eds.), Beyond the Water Towers:The Unfinished Revolution in Mental Health Services, 1985–2005,The Sainsbury Centre for Mental Health: London. Burchard,T. (1999), The Evolution of Disability Benefits in the UK: Re-Weighting the Basket, Centre for Analysis of Social Exclusion, London School of Economics: London, http://eprints.lse.ac.uk/6490/1/The_Evolu tion_of_Disability_Benefits_in_the_UK_Re-weighting_the_basket.pdf. Burns, T. and Priebe, S. (1999), Mental Health Care Failure in England: Myth and Reality, British Journal of Psychiatry,Vol. 174, pp. 191–192. Cook, I. G. and Halsall, J. P. (2011), Aging in Comparative Perspective: Process and Policies, Springer: New York. Cook, I. G.; Halsall, J. P., and Wankhade, P. (2015), Sociability, Social Capital and Community Development: A Public Health Perspective, Springer: New York. 201

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Eastman, N. (1995), Anti-Therapeutic Community Mental Health Law, British Medical Journal, Vol.  310, pp. 1081–1082. Fone, D. L. and Dunstan, F. (2006), Mental Health, Places and People: A Multilevel Analysis of Economic Inactivity and Social Deprivation, Health and Place,Vol. 12, No. 3, pp. 332–344. Hall, S. (1979), The Great Moving Right Show, Marxism Today, January 14–20. Ham, C. (ed.) (1997), Health Care Reform: Learning from International Experience, Open University Press: Buckingham. Hills, J. (1993), The Future of Welfare: A Guide to the Debate, Joseph Rowntree Foundation:York. KF, The King’s Fund (2015), Has the Government Put Mental Health on an Equal Footing With Physical Health? http://www.kingsfund.org.uk/projects. Klein, R. (1995), The New Politics of the NHS, Longman: London. Konrad, N. (2002), Prisons as New Asylums, Current Opinion in Psychiatry,Vol. 15, No. 6, pp. 583–587. Mechanic, D. (1995), The Americanization of the British National Health Service, Health Affairs, Vol.  14, No. 2, pp. 51–67. MHF, Mental Health Foundation (1994), Creating Community Care: Report of the Mental Health Foundation Inquiry Into Community Care for People with Severe Mental Illness, Mental Health Foundation: London. NHS, National Health Service (2015), About the NHS, http://www.nhs.uk/nhsengland/thenhs/about/pages/ nhscoreprinciples.aspx. Peston, R. (2008), Who Runs Britain? Hodder: London. Phillipson, C. (1998), Reconstructing Old Age, Sage: London. ——— (2013), Ageing, Policy: Bristol. Powell, J. (2014), Power and Aging: A Micro and Macro Analysis, Nova Science: New York. Powell, M. and Hewitt, M. (2002), Welfare State and Welfare Change, Open University Press: Buckingham. Reid, S. (2013), Mythbusters: Strivers Versus Skivers, New Economics Foundation, http://www.neweconom ics.org/mythbusters-strivers-v-skivers. Stafford, M. and Marmot, M. (2003), Neighbourhood Deprivation and Health: Does It Affect Us All Equally? International Journal of Epidemiology,Vol. 32, No. 3, pp. 357–366. Thatcher, M. (1987), Aids, Education and the Year 2000!, Women’s Own Magazine, October 31. Thornicroft, G. (1994), The NHS and Community Care Act, 1990: Recent Government Policy and Legislation, Psychiatric Bulletin,Vol. 18, No. 1, pp. 13–17. Walker, A. (1996), Intergenerational Relations and the Provision of Welfare, in A. Walker (ed.), The New Generational Contract: Intergenerational Relations, Old Age and Welfare, UCL Press: London. Wiggan, J. (2012),Telling Stories of 21st Century Welfare:The UK Coalition Government and the Neoliberal Discourse of Worklessness and Dependency, Critical Social Policy,Vol. 32, pp. 383–405. Young, J. (1999), The Exclusive Society, Sage: London.

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12 The Swedish welfare state system With special reference to inequality and the redistribution paradox Joakim Palme

There is a strong notion of exceptionalism associated with the concept of a Swedish welfare state model, both internationally and in the country itself (Palme, 2015). The model has been associated not only with the character of social welfare policies as such but also with people’s egalitarian living conditions. In addition, the way in which decisions have been made in a research-based and rational fashion is supposed to have contributed to the “modern” character of the system, including its continuous adaptation to changing structural conditions. The Swedish model has often been seen as the clearest case of a Scandinavian social democratic welfare state model, and while the imprints of a social democratic ideology are obvious, it is also clear that other ideas and interests have made their marks. The fate of the Swedish model has evoked particular attention in the globalization context, which has a lot to do with its history of the highest levels of taxation in comparison to other advanced industrial nations (Palme, 2012). Here it is important to recognize that the post-war welfare state expansion went in tandem with a free trade strategy from the political side and a national economy dominated by large export firms experiencing an ever-deeper global integration. There are even those who claim that globalization has been a critical driver for welfare state expansion in small states (Katzenstein, 1985). Hence, the “old” conventional wisdom of the golden age used to be that the welfare state would go hand in hand with globalization. The neoliberal “turn” meant that this mindset was fundamentally challenged. The view that a Swedish kind of welfare state model is a heavy burden to bear and, consequently, will not be sustainable in the future became increasingly and widely expressed (e.g. Langby, 1984).The crisis of the 1990s, and the cutbacks and reforms introduced as a consequence, led to the fact that also the supporters of the model began to see the end of it (e.g. Lindberg, 2000). Still, in the wake of the present political crisis of European integration, not only has the future of the European Social Model come into focus, but a number of studies have also identified Sweden and the other Scandinavian countries as best performers by combining low poverty and inequality, on the one hand, with high employment rates and strong growth records, on the other hand. More recently, Swedish taxation levels have come down significantly, and various welfare state programs have been changed and reformed, and in some respects retrenched (Ferrarini et al., 2012). Furthermore, inequalities have increased also in Sweden (Björklund and Jäntti, 2011). This makes an analysis of the real problems and potentials of the Swedish model relevant and 203

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important beyond its borders.What appears to be of particular relevance is to discuss the underlying redistributive strategy of the Swedish welfare state model, which has been associated with the notion of a “paradox of redistribution.” The chapter starts with an outline of the historical emergence of the model and its current benefit package. It then discusses the current trends and challenges. A special section is devoted to the “paradox of redistribution” and the trends in inequality. The concluding section discusses the future challenges to the Swedish welfare state model.

Major characteristics of the Swedish welfare state system Historical development trajectories Sweden has followed a rather distinct path in the development of social policy institutions, and this has led to a specific combination in terms of the coverage and level of benefits (Kangas and Palme, 2005). In social security, there have been two different points of departure; one is the old poor law system and the other is the various forms of voluntary organizations (such as friendly societies). From these two origins, the Sweden followed a Nordic-type pathway in social security to be described in this chapter. The universalism of these reforms of cash benefits also came to influence the subsequent expansion of social services. The first pension law from 1913 was universal in its inclusion of everyone in a contributory system, but it is worth pointing out that it primarily delivered targeted benefits, that is it retained the asset- and means-testing (AMT) principle of the poor laws but expanded coverage to the large majority of the elder population. When after World War II means testing was abolished in the pension system, we can speak of the institutionalization of a basic security model similar to the Beveridge model in Britain with its flat rate benefits. It was, however, tax financed, which is different from the principle of social security contributions in the Beveridge model. The universalization of the pension system was accompanied by the introduction of universal child benefits. In the late 1950s, with the introduction of earnings-related benefits within a universal framework, the basic security programs became encompassing, aiming at both basic and income security. This is different from the Continental European tradition of state corporatist social insurance, with its separate administration of social protection for different categories in the labour market (see Korpi and Palme, 1998). The introduction of state subsidies to voluntary programs in sickness (1910) and unemployment insurance (1934) can be said to represent another starting point: the voluntary statesubsidized model. In 1955, sickness insurance became universal and the earnings-relatedness was expanded in a stepwise fashion, which led the development path to the encompassing model also here. The unemployment insurance system in Sweden still bears strong features of the voluntary state-subsidized model (Kangas and Palme, 2005). The development of the social services and health care in the Swedish welfare state has a special history. Benefits in kind are separated from cash benefits both administratively and financially. The coverage and level of expenditures on services is also what makes Sweden (together with Denmark) stand out among the advanced welfare states. The universal provision of social services in Sweden is, by and large, a post-war phenomenon (Béland et al., 2014). Sweden established a universal health care system in the mid-1950s. It was followed by the expansion of elder care and childcare services. Step by step the policies for disabled persons have become part of the universal system of social protection (Palme, 1999). In this context it also appears warranted to underline the importance of full employment and active labour market policy, as well as the “dual-earner model” for the character of the Swedish welfare state model. 204

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In family policy, Sweden is hence a good example of how the male-breadwinner model has been transformed into a dual-earner model (Ferrarini, 2006). It is evident that this has required policy changes in a number of respects. The fact that women, over the post-war period, have taken part in education at different levels, to a higher and higher degree, is one important factor behind their massive entrance on the labour market. Another important factor was the abolishment of joint taxation of spouses, which improved incentives for married women to enter paid employment. Moreover, childcare and care for elder persons are important both as resources for women with care responsibilities and as providers of employment opportunities. The importance of the way both the social support and tax systems came to be based on the individual should not be underestimated and stands in sharp contrast to the traditional male-breadwinner design in other parts of Europe. That the different reforms put emphasis on women’s independence is clear from the fact that the benefits in all the supportive systems introduced were being paid to the mothers. For unmarried mothers, Sweden has developed special supportive programs. The underlying assumption has been that the woman could provide for herself and meet a substantial part of her children’s expenses (Wennemo, 1994). The expansion of entitlements to benefits in both cash and kind has been accompanied by growing costs. This has been fueled first by the aging of the population and then by increased unemployment as well as other needs (Palme et al., 2003; Kangas and Palme, 2007). However, the costs of the transfer systems in Sweden do not really diverge from the Western European pattern, not even when it peaked in the 1990s (Adema and Ladaique, 2005). Several factors have contributed to that. The fairly high formal pension age and actual retirement age, as well as the (until the 1990s) low unemployment rates are two examples. The high labour force participation rate among women is another important factor. If we look to the social services, however, the costs have been high by comparison. More recently, the expenditure levels have, however, hovered around the EU average (Eurostat, 2016). There used to be a heavy reliance on general taxation for the Swedish system of social security. This was true for the universal benefits as well as the subsidies to voluntary insurance. The municipalities have always had a strong financial responsibility for social assistance and care of different vulnerable groups. However, the introduction of earnings-related benefits in the 1950s was based on employers’ social security contributions, which marked a major shift in funding. These contributions from employers have moreover funded labour market policies and childcare services. In the 1990s, insured persons’ social security contributions were introduced to cope with the public deficits and now go to the pension system. The expansion of health care and other social services were made possible by increased local taxes paid to the counties and municipalities. In addition, the state contributed to this sector with roughly one-fifth of the total expenditures. Apart from the voluntary unemployment insurance, which was administered by the trade unions, the administration of the social insurance system was the responsibility of the public authorities at the national and local levels (Palme et al., 2003).

Benefit package The pension system in principle covers the entire resident population in Sweden (Palme, 2005). Residents in the working-age population either earn entitlements by having an income from work (or social insurance) or by getting entitlements to future basic benefits just by being residents. Among the elder persons, the statutory system pays out a mix of different benefits including income pension, funded benefits, guarantee pensions and old-age income support (for newcomers). Survivor’s benefits are paid to children and surviving spouses below pension age. The old widow pension system, which is being phased out, still pays out benefits. The pension 205

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system is administered by a special government authority, the Pension Agency, which pays out not only old-age pensions and survivor’s benefits but also housing benefits to pensioners. Income-related pensions are based on notional defined contributions (NDC) and lifetime earnings, but pension entitlements are also earned for parental leave, sick leave, studies and compulsory military service. Pension contributions are shared by employers and employees, employers paying the larger share. Income pensions rely on both pay-as-you-go financing (PAYG) and funding. Sixteen percent of the gross income goes into the notional defined contribution accounts (NDC), following the PAYG principle, and 2.5 percent goes into fully funded individual defined contribution accounts (FDC). Pension accrual and pension payouts are automatically adjusted to wage growth and life expectancy. The retirement age is flexible starting at 61, and the size of benefits is adjusted on an actuarial basis. Individuals have the right to work until they are 67 but can continue to contribute if they stay employed. Individuals with a low-income pension receive a guarantee pension which provides a basic benefit without means-testing. The old-age income support is aimed at those who are new residents to Sweden and is subject to means testing. In 2014, more than 2.1 million old persons received an old-age pension and most of them got some form of income-related pension. Altogether 786,000 persons got part of – or the whole – pension from the guarantee benefit component. By 2014, 1.2 million retirees had also started to get a pension from the funded component of the system but only 19,000 received old-age income support. Total expenditures amounted to SEK 287 billion. The average benefit including part time pensioners was SEK 137,000 per year (PM, 2016a). Over time, work accident benefits have been merged with sickness cash benefits for temporary absence, and only when it comes to permanent injuries does the system offer extra compensation. Following the pension reform of 1994–1998, the sickness cash benefit system has also been merged with the other disability benefits (Palme, 2005). This has been part of a series of reforms that have removed other reasons than work incapacity due to ill health as reason for rewarding benefits, such as labour market status or age. It should be noted that there have been remarkable and partly unexplained variations over time in the paid sickness absence rates which has generated recurrent debates.The sickness and work accident insurance provides replacement rates of 80 percent of earnings. Compensations are lower in case of long or permanent disability. There is a guaranteed basic level for disabled persons below pension age that do not have, or have modest, work/earnings histories (Ferrarini et al., 2012; Försäkringskassan, 2016a). The unemployment benefit system continues to be based primarily on the Ghent system, that is on voluntary state-subsidized insurance where independent insurance funds are administered by the trade unions. In addition to these funds, uninsured unemployed persons can claim a basic benefit if they have fulfilled the work requirements. The unemployment benefits have tended to be less encompassing in terms of middle-class inclusion. The generosity has also tended to be less so for average earners (Ferrarini et al., 2012). In 2015, the ceiling for the unemployment insurance was increased for the first time in many years, from SEK 18,700 to SEK 25,025 monthly. The 80 percent replacement rate applies to the first 200 regular working days of unemployment, whereafter the benefit is reduced to 70 percent. The basic duration of benefits is 300 working days. For parents who have children under the age of 18 the duration can be extended by 150 days. Those who remain unemployed are referred to active labour market programs. Insured persons aged above 25 are entitled to an earnings related “activity grant.” For insured persons a flat rate benefit is paid by the Social Insurance Agency. Persons aged between 18 and 25 are eligible for a “development grant” when participating in a labour market program. The proportion of those who are unemployed that actually receive a benefit is very low, which has to do with the fact that they are newcomers 206

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to the labour market either because they are migrants or youth. This is no surprise seen in the light of the large increase in refugee migration (Fritzell et al., 2016). It can be argued that the active labour market policy is part and parcel of the Swedish welfare state model. Historically, the ambition was to spend 75 percent on active labour market policies (ALMP) and 25 percent on cash benefits when it comes to employment-related public expenditures. With the mass unemployment of the 1990s this changed. It is also remarkable how much the ALMP expenditures have decreased in the 21st century. Compared to other countries Sweden has changed from being uniquely generous to being more average (Palme and Cronert, 2015). The universal child benefits continue to be a cornerstone of the Swedish welfare state model. In 2016, a monthly child benefit is equal to SEK 1,050 (less than 10 percent of an average net wage). The universal benefits are paid at a higher rate for the third child and at an even higher rate for the fourth and subsequent children. As argued earlier, the modernization of family support has been guided by the ambition to support gender equality and a “dual earner model.” This includes various social services but is also evident in the design of cash benefit programs. Parental leave benefits replaced the maternity leave benefits already in 1974. From 2016, parents have the right to up to 16 months of paid leave; 3 months only provide comparatively low flat rate benefits. Of the 13 months of earnings-related benefits (80%), 3 months are reserved for the mother and father respectively. The rest of the earnings-related leave period can be divided freely between the parents.The 3 months’ leave with flat rate benefits have to be divided equally. Here it deserves to be emphasized that the system also provides earnings-related benefits for the care of sick children (Försäkringskassan, 2016b), and that not only the social insurance system but also the tax system, with separate taxation of spouse income, are guided by an individualized logic which stands in contrast to the male-breadwinner logic in some of the Continental European countries (Tallberg et al., 2010). Despite the encompassing nature of the Swedish welfare state model, the targeted benefits continue to play an important role for redistribution and poverty alleviation. Housing benefits are important but have been in effect become a targeted system for two categories of Swedish households: old-age pensioners and lone-parent families (even if other groups may be eligible). Housing benefits may make up a substantial part of the net income of old-age pensioners with only a guaranteed pension and living in rental housing (PM, 2016b). For lone parent households, housing benefits may be as important as the universal child benefits, or even more important (Försäkringskassan, 2016c). Social assistance benefits are paid by the municipalities, but there are national regulations and guidelines. The level of benefits has increased in absolute terms over the past two decades, but the price indexing has meant that benefit levels have been lagging behind wages and quite substantially so (Kuivalainen and Nelson, 2011). The benefit levels are not high enough to lift a long-term social assistance recipient over the usual definitions of poverty lines. The number of social assistance recipients has been fairly stable in recent years. A high proportion of the recipients are foreign born (Fritzell et al., 2016). The Swedish health care system gives all residents irrespective of nationality access to full health care services (Socialstyrelsen, 2014). The system is basically administered by about 20 county councils and primarily financed out of local taxes to these counties (80%), supplemented by state subsidies (17%) as well as user fees (3%). The decentralized management implies that there are important local variations in how the health care is organized, including the user charges. However, children up to the age of 18 do not pay any user fees and maximum ceilings apply for the adult population: SEK 1,100 per year for outpatient care in 2016. Since the early 1990s, there has been a trend towards decentralization of the care of patient groups with more or less permanent caring needs. Thus, the care of elder persons, disabled and psychiatric patients 207

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has become the primary responsibility of the municipalities both in terms of administration and financing. Some of the actual care is however provided by the hospitals under county council supervision. There are also attempts to achieve national steering of the system, which also opens up for different political priorities. In 2010, for example, a consumer choice model was imposed on the counties by the center-right government (Fritzell et al., 2016). The costs of the health care system have been remarkably stable over the past decades, with only a slight tendency to increase, and have recently been over 9 percent of GDP, which is close to the EU and OECD averages (Socialstyrelsen, 2014). Behind the stable costs there have been a lot of changes in the organization of the health care sector, above and beyond the aforementioned decentralization. Inspired by “New Public Management,” purchaser-provider models were introduced early on. This has to varying degrees been complemented by the introduction of private providers of services. Since the early 1990s, the historical reliance on hospital care and the weak role of primary care has gradually been shifted, and today Sweden has among the fewest hospital beds per 1,000 inhabitants. The number of treatments has however continued to increase thanks to increased use of day surgery and so forth. Private insurance has increased, partly through the expansion of collective workplace-based insurance policies, and represents about 10 percent of total health care expenditures (Hartman, 2011). The elder care system in Sweden was developed and expanded early by international comparison. It has also gone through substantial restructuring over the past decades (Palme et al., 2003).This has not only resulted in increased private provision of publicly provided services but also in a concentration of services to those with great caring needs. Still, Sweden has a comprehensive public elder care system and the two main forms of municipal elder care are “home help services” and “institutional care.” Fees for elder care are subject to maximum ceilings, and this applies to both home help services and institutional care. In 2013, 23 percent receive home help and 15 percent receive different forms of institutional care of the population above 80 years of age (Fritzell et al., 2016). Policies to the disabled are not only about providing cash benefits but not least about various kinds of benefits in kind. This is not a new phenomenon. Sweden has a long tradition of integrating the disabled in broader programs of benefits of both cash and in kind. For example, home help services have been delivered for the disabled in much the same way as for elder persons. A new reform launched in the mid-1990s deserves to be mentioned because of its innovative nature and sizeable costs (Palme et al., 2003). The new program offered a nationwide program of supplying funding for personal assistants providing 24/7 services to severely disabled persons. This has been a game-changer in terms of providing a different quality of life and independence for some of the most vulnerable members of society. It has also been associated with increasing costs amounting to almost SEK 30 billion in 2015 (Försäkringskassan, 2016d). Childcare services have continued to grow also during the “retrenchment era” of the Swedish welfare state history. This means that the system has become more or less universal (Béland et al., 2014).The guaranteed entitlements to childcare are linked to the length of the paid parental leave period which is longer than 1 year. In 2012, 50 percent of 1-year-olds were enrolled in subsidized childcare. Eighty-nine percent of 2-year-olds are enrolled and almost 95 percent of those aged between 3 and 5.There has furthermore been an increasing emphasis on pedagogical content of these services (Fritzell et al., 2016). In brief, the Swedish welfare state provides all residents with an extensive system of benefits from the cradle to the grave. It contains some old kind of policy instruments, some reformed components and also some new policy measures. In a comparative perspective, the costs of the system do not stand out as exceptional anymore. The funding of the system seems manageable but is of course challenged, in the short run by large waves of refugee migrants and in the longer 208

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run by the aging population. On top of that, there are gaps and other shortcomings of the system in terms of achieving the intended social objectives. What deserves further deliberation is how the political economy of the Swedish welfare state has been affected by the various incremental changes that can be observed in the different programs.This is what we turn to in the following section, first concerning the currents trends in the reform work and then their implications for the Swedish strategy of redistribution.

Current trends: big reforms and policy drift Starting with the 1991 tax reform (“the tax reform of the century”), there has been a number of important reforms of the Swedish welfare state. Social services, old-age pensions, and active labour market policies stand out as the clearest examples. There have also been areas where “non-decisions” have been more dominant, such as with sickness insurance. It is obvious that the changes during the latest two decades have been affected by international factors on an ideational level, but they can also be seen as responses to endogenous reform needs as well as to changes in political power (Palme, 2012). The tax reform was, indeed, in many respects comprehensive: broadening the tax base and reducing progressivity (Palme, 2012). It is clear that there were strong domestic pressures for reforming the tax system. The reform however followed the international pattern of reducing progressivity in order to improve work incentives and a broadening of the tax base. The design of the reform got some domestic influences intended to secure the redistributive effects of the tax system: more redistribution (primarily via family policies) despite less progressivity on the revenue side. The more recent abolishment of wealth and inheritance taxes, as well as a restructuring/ reduction of property taxes, suggest that it is becoming more difficult to tax capital even if it remains doubtful whether these changes were actually necessary (especially property tax). It is not all that clear that the EU membership has had any (real) direct effects. The lowering of value-added taxes on some products in 1995 is a good example of referrals to the EU membership in the domestic debate, but the question remains open if this argument was used a strategic positioning in domestic political bargaining.The corporate tax is particularly affected by what is happening in the remaining parts of EU. At the same time it is obvious that the changes in the tax system are still largely determined by domestic party policy positions (Tallberg et al., 2010). The pension reform of 1994–1998 was driven by a national recognition of that the time was ripe for a reform because of both economic and social policy reasons (Palme, 2005). The international trend in the private pension sector also made an imprint on the Swedish reform: there was a move from a “defined benefit formula” (DB) to a “defined contribution formula” (DC), which was given a specific national interpretation in the NDC accounts. The NDC accounts can be seen as a response to the critique of the poor cost control and incentive structure in the old DB system. The fully funded individual NDC accounts, with the option of private fund management, were part of the reform compromise and a clear expression of the political priorities of the center-right parties. The reform may not have solved all issues once and for all, but it has put the system on a more financially sustainable ground given the future demographic challenges associated with the aging of the population. The reform was also built around a very broad political coalition. In 1992, an important reform in the social services introduced a possibility for profit-seeking private firms to be providers of publicly funded social services (across the board). The reform was driven by a domestic political desire to introduce choice and private entrepreneurship in the public sector. It was likewise influenced by the global spread of “New Public Management” 209

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as well as by neo-liberalism. One question is if it will deliver increased middle-class support because of individual choice or if it will imply a forbearance of an “exit” from the welfare state of these groups to more pure private solutions. There are other hot political issues around the role of profit-seeking firms in this sector. It is, for example, genuinely unclear if the economic efficiency has been improved (Hartman, 2011). Questions have also been raised around the quality of provisions in the elder care as well as in the health care sector. In the education system concerns are deepening around increased segregation and decreasing student performance (Anderson et al., 2010). Over a long time period, it appears that both sickness and unemployment insurance have been drifting away from the Swedish model’s core feature of adequately insuring a large majority of the population within the statutory or state-subsidized insurance programs (Ferrarini et al., 2012). In sickness insurance, the ceiling for benefit purposes has been indexed to prices. When it was introduced in the 1960s, more than 90 percent of the population had earnings below that ceiling. In 2012 a full-time employee with average earnings in manufacturing will have earnings above the ceiling. It should be noted here that the Social Democratic government eventually had increased the ceiling in 2006, but when the center-right government came into power later the same year it was immediately lowered again. The highest benefit in unemployment insurance has traditionally been more modest than in sickness insurance (compensation loss of earnings up to around what an average full-time employee would earn). For a few years during the first part of this century the highest benefit was increased for short-term unemployed, but that was also abolished by the center-right coalition when it came into power. Hence, a combination of decisions and “non-decisions” have contributed to a kind of drift (see Streeck and Thelen, 2005) of these social insurance program in terms of their coalition building potential between low- and high-income earners. The red-green coalition government elected in 2014 has raised unemployment benefits and has expressed ambitions to do the same with sickness/ work accident benefits. The development in the labour market has to be interpreted in contrast to the early 1990s employment crisis. Towards the end of the 1990s the unemployment rate did not just go down but the employment rate was also raised (Palme et al., 2003). Following the quick recovery of the end of the 1990s and the first 2 years of the 2000s, there was a backlash in 2002. This was followed by a slower upturn, extending towards the mid-decade, which was perceived by some as “jobless growth.” During the fall of 2006, the employment rate increased quite dramatically which was further stimulated by tax reductions and other governmental subsidies geared towards employment in 2007. The number of permanent employment contracts increased after some time of decline. Following the global financial crisis in 2008, unemployment went up but has started to come down again despite a high inflow of refugee migrants. During the employment crisis of the 1990s, active labour market policies were expanded massively even if some of the programs contained very little in terms of training (Palme et al., 2003).The recovery at the turn of the century meant a dramatic decrease of the number of people enrolled in targeted labour market activity. Simultaneously, the quality of the labour market programs in place was increased. However, for the past decade, the active labour market policies have been responding less to the changes in unemployment. In the wake of the financial crisis, Sweden faced severe challenges such as very high youth unemployment.The Swedish Fiscal Policy Council (2010), appointed by the government, has addressed the need to enhance the active labour market policy programs. The weak position of the foreign-born labour population on the Swedish labour market is also a case of great concern, especially in the light of large waves of refugee migration. Here it deserves to be pointed out that Sweden introduced a labour migration regime for non-EU citizens to get a temporary work permit if they have a labour contract. 210

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In this context it should be noted that the introduction of earned income tax credits effectively reduced the net replacement rates of social insurance benefits (Palme and Cronert, 2015). The benefit duration has also been subject to various restrictions. Of special interest is the increase of an insured person’s contribution to the earnings-related part of the unemployment insurance administered by the trade unions. The motivation given by the government was that such a contribution would penalize excessive wage demands from the unions that increases unemployment in that branch. The result was a dramatic decline in the coverage of the unemployment insurance but also in union density, from 80 percent to below 70 percent.This suggests that small changes may have large effects on power relations (intended or not). The changes over recent decades hence appear to be of an incremental nature (Streeck and Thelen, 2005) rather than of a paradigmatic kind. However, the gradual shifts in the interest formation around various social policy systems seem big enough to trigger political processes that in the longer run may alter the welfare state model in more fundamental ways and have repercussions for social and economic inequalities in a broader sense.

Trends in inequality and the paradox of redistribution The focus has so far been on policy and policy changes. Because the understanding of the Swedish model often is referring to equality per se, it appears warranted to reflect on the trends in poverty and inequality.The heyday of the Swedish model is here often set to around 1980, when Sweden saw an “all-time low” in inequality with a Gini coefficient of family income distribution even below 0.2 (Palme, 2006). The understanding of this achievement can be informed by a policy logic that is sometimes labeled as the “paradox of redistribution”: the more we target the benefits at the poor only and the more concerned we are with creating equality with equal public transfers to all, the less likely we are to reduce poverty and inequality (Korpi and Palme, 1998). From this follows that the successful redistributive strategy of the Swedish model was based on the inclusion of the middle class in the system of social protection, not only as taxpayers but also as potential benefit recipients, and that this had paved the way for a mobilization of generous provisions for vulnerable groups such as the unemployed, disabled, elder persons and families with children. When it comes to insurance programs for sickness and unemployment, it should be emphasized that broad systems are beneficial in redistributive terms for low-income people because they have higher risks for both sickness and unemployment. Since then, however, Sweden has followed an international trend of rising inequalities (Björklund and Jäntti, 2011). The increase during the 1980s was fairly modest and partly driven by increased earnings inequality. The 1990s was marked by a deep economic crisis during the first part of the decade and an economic recovery during the second half. Interestingly enough, inequality did not go up during the crisis but instead during the recovery (Palme et al., 2003). The increase was partly driven by a strong increase in the wage premiums for managers primarily in the private sector.The most important driver, however, was capital income (Björklund and Jäntti, 2011). Because these analyses include real gains on the stock market, yearly fluctuations are quite significant. The first part of the 2000s was signified by stable inequalities. The second part of the decade is marked by a dramatic increase and, again, income from capital is the main driver whereas earnings inequalities remain surprisingly unchanged (Björklund and Jäntti, 2011). Whereas employment increased up to the global financial crisis, households without employment income are lagging behind significantly. By 2009 the Gini coefficient of income distribution for Sweden reached the level that was recorded for the US in 1980 (Björklund and Jäntti, 2011), and it has 211

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continued to increase. Overall, the most important factor behind the inequalities is what happens with the top incomes – the right tail of the distribution. However, especially since 2007, relative decline of incomes in the lowest decile – the left tail of the distribution – is contributing not only to increased relative poverty rates but also to overall inequality (Fritzell et al., 2014). Hence it is clear that the increased inequalities in market incomes, both earnings and capital income, have contributed to increased inequality. How have policy changes over the recent decades modified or amplified the trend towards increased income inequality? We can get some information by looking at the redistributive effect of the tax/transfer system: the effects were on roughly the same levels during the 1990s and early 2000s (Palme, 2006) but have declined over the past decade (Palme and Cronert, 2015). What policy changes have contributed to this decline? We can observe that social insurance benefits tend to be less generous in the 21st century than they were in 1980.This is evidenced by the formal replacement rates in the most important social insurance program nowadays being 80 percent rather than being 90 percent as in 1980. As mentioned earlier, the middle-class inclusion has also suffered from the fact that an increasing part of the labour force has earnings above the ceiling for benefits purposes. A number of basic benefits in the system have also been lagging behind due to the price indexing. A clear example of this is found with the social assistance scale rate, which has not only lagged behind but also fallen below the standard poverty lines such as 50 median income or “At Risk of Poverty” (AROP), which is the one used in European Union comparisons (Kuivalainen and Nelson, 2011; Marx and Nelson, 2013; Palme and Cronert, 2015).The income situation of those outside employment has also affected by introduction and expansion of earned income tax credits. One effect is that they also effectively lower the replacement levels of social insurance and other kinds of benefits. Other changes in the tax system, such as the abolishment of inheritance and wealth taxes as well as the lowering of real estate tax, appear to have fueled this development by increasing top as well as average incomes (Fritzell et al., 2016). In the tax/transfer system, the Swedish welfare state model hence struggles with its old recipe of combining middle-class inclusion and generosity towards vulnerable groups. The capacity of social policy insurance to form the basis of coalition building between different groups in society not only appears to be in decline but also to be close potential tipping points when majorities of the working population will have to turn to private solutions in order to be adequately insured. While the effects of external factors at times have been undeniable, for example during the crisis of the 1990s, there is little to suggest that the development in the 2000s is determined by other factors than domestic political priorities. An understanding of the redistributive effects of the Swedish welfare state should include benefits in kind. Redistribution can be achieved also in systems that are funded with flat taxes, such as the Swedish local social services. Rothstein (1998) illustrates this in a straightforward manner: a 30 percent tax rate on a high-income person earning SEK 1 million per year raises SEK 300,000 in taxes to spend on social services and health, while the same tax rate implies that only SEK 30,000 is raised from a low-income person earning SEK 100,000. So even if a high-income earner may consume slightly more of the social services, it still means that you can redistribute substantial sums of money via systems of this design. This policy logic still applies, but may of course be affected by a privatization of the funding of services. Even if such tendencies can be observed in the health care sector, the main privatization story in Sweden is that of private provision of publicly funded services. It also appears warranted to point to the equalizing effects of social services in a gender perspective. Social services related to children and elder persons also make it possible for women, 212

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who tend to end up with the primary caring responsibilities, to combine care work with earning a market income. This equalizes the incomes of men and women but also tends to equalize household incomes.This is but one example of the potential of a Swedish kind of welfare model to affect what has been labeled “pre-distribution inequality” (Hacker, 2011). We can see the “social investment approach” to social policy as a perspective that also includes policy instruments associated with the distribution of human capital, ranging from early childcare education to lifelong learning, and hence aimed at affecting the market incomes as another way of extending the perspective on the welfare state as a strategy of equality (Morel et al., 2012) and a key for understanding how equality can go together with high growth (Sapir, 2003). In one important respect, the paradox of redistribution can be argued to follow the same logic in the social services and education/training parts of the welfare state, as in social insurance: it is based on the idea that you can affect the willingness to pay taxes for redistributive purposes by including the middle class as benefit recipients only as long as the broad majority finds the adequacy of provisions sufficiently good.

Discussion The Swedish welfare state model has evolved over more than a century and continues to change. The changes are influenced by a changing environment where the ongoing globalization, as well as Europeanization, not only are imposing pressures and constraints but also offer opportunities. In addition, the policy institutions mature and evolve according to their own logics, and when policies interact with population change in different forms, this has repercussions for the reform work. The Swedish development illustrates how political decisions and non-decisions gradually reshape the different policies by introducing new elements or just by letting the programs drift. That social security institutions are dependent of political decisions makes the relative strengths of the different political parties crucial for the fate of the Swedish model. Here there have been some important changes in how the political parties on the centerright have framed and pursued their welfare state policies. The most dramatic change has been recorded with the Conservative party (Moderata Samlingspartiet). Starting in the early 1980s, the party took a strong neoliberal orientation. That changed only in the 21st century with a changed rhetoric and, to some extent, policy proposals. It started with their economic policy proposals during the fall of 2003: they abandoned their old tax-cutting/systemic-change approach for a much more stepwise strategy only proposing small changes and also advocating evaluation of all policies and policy changes. The other three parties on the center-right suddenly appeared to be to the right of the Conservative party. This was further reinforced by a change in the tax policy of the Conservative party, as it abandoned its proposals of cutting taxes primarily for the rich in favor of tax cuts for the low- and middle-income earners. Partly as a response to this, and partly as a response to the increasing awareness on the future demographic pressures on public spending, the other center-right parties now appear to follow a tax-freeze strategy. The only clear example of policy proposals from the political center-right that have been tied to increased taxes is linked to the “Great Pension Reform,” where the insured person’s contribution to the fully funded part of the system can be seen as a tax increase. When we compare the actions of the center-right coalition and the Social Democratic government of the early and mid-1990s there are a lot of similarities, but there is also a clear difference in terms of the Social Democrats increasing a great number of taxes while the center-right coalition did the opposite. This contributed to the fact that the Social Democrats were more successful in balancing the budget. It is of course more of an open question how they will respond to the future challenges. 213

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In the short term there are some important decisions to be made about the content and funding of the social insurance system: sickness, unemployment and work-accident insurance. The priority of the government elected in 2014, led by the Social Democrats, has been to improve unemployment insurance. This happens at the same time as the public finances are pressurized by large waves of refugee migration. In the longer run, the increased costs of an aging population are at stake and will inevitably lead to various kinds of adaptations. The future of the Swedish model is not only dependent on statutory policies but also on what happens on the labour market between the social partners. Labour and management tend to be discussed in terms of negotiated solutions and these constitute an important feature of the Swedish model.This is not to argue that the underlying conflicts in society have been eliminated but rather that compromises have been viewed as a means of reducing open conflict and thereby promoting growth and securing the tax base of the welfare state. Finally, the Swedish case is interesting as the exemplar of a universal and encompassing welfare state. The question is whether we are witnessing the end of this (in)famous model. Is it possible to maintain such a welfare state in a globalized economy with mass migration and an aging of the population? Is it easier to compensate the aging of the population by increasing the immigrant part of the labour force? Will there be a political majority that desires this? The Swedish model is at important political crossroads, although this appears to be almost like a constant state of affairs.

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Hartman, L. (ed.) (2011), Konkurrensens Konsekvenser:Vad Händer med Svensk Välfärd? SNS Förlag: Stockholm. Kangas, O. and Palme, J. (eds.) (2005), Social Policy and Economic Development in the Swedish Countries, Palgrave/Macmillan: Basingstoke. ——— (2007), Social Rights, Structural Needs and Social Expenditures, in J. Clasen and N. A. Siegel (eds.), Investigating Welfare State Change, Edward Elgar: Cheltenham. Katzenstein, P. (1985), Small States in World Markets: Industrial Policies in Europe, Cornell University Press: Ithaca, NY. Korpi, W. and Palme, J. (1998), The Paradox of Redistribution and Strategies of Equality: Welfare State Institutions, Inequality and Poverty in the Western Countries, American Sociological Review, Vol.  63, pp. 661–687. Kuivalainen, S. and Nelson, K. (2011), Eroding Minimum Income in the Nordic Countries and Abroad? Reassessing the Typical Character of Nordic Social Assistance, in J. Kvist, J. Fritzell, B. Hvinden, and O. Kangas (eds.), Changing Social Equality:The Nordic Welfare Model in the 21st Century, Policy: Bristol. Langby, E. (1984), Vinter i Välfärdslandet, Brombergs: Stockholm. Lindberg, I. (2000), Den Glömda Krisen, Premiss: Stockholm. Marx, I. and Nelson, K. (eds.) (2013), Minimum Income Protection in Flux, Palgrave/Macmillan: Houndmills. Morel, N.; Palier, B., and Palme, J. (eds.) (2012), Towards a Social Investment Welfare State, Policy: Bristol. Palme, J. (1999), The Nordic Model and the Modernisation of Social Protection in Europe, The Nordic Council of Ministers: Copenhagen. ——— (2005), Features of the Swedish Pension Reform, Japanese Journal of Social Security Policy, Vol. 4, No. 1, pp. 44–53. ——— (2006), Income Distribution in Sweden, Japanese Journal of Social Security Policy, Vol. 5, No. 1, pp. 16–26. ——— (2012), Den Nordiske Velfærdsstatog Globalisering: Sverige som Eksempel, Økonomi & Politik, December. ——— (2015), How Sustainable is the Swedish Model? in B. Marin (ed.), The Future of Welfare in Global Europe, Ashgate: Farnham. Palme, J.; Bergmark, Å.; Bäckman, O.; Estrada, F.; Fritzell, J.; Lundberg, O.; Sjöberg, O.; Sommestad, L., and Szebehely, M. (2003), A Welfare Balance Sheet for the 1990s, Scandinavian Journal of Public Health,Vol. 3, pp. 1–143, Supplement 60, August. Palme, J. and Cronert, A. (2015), Trends in the Swedish Social Investment Welfare State: “The Enlightened Path” or “The Third Way” for “the Lions”? ImPRovW Working Paper, No. 15/12, University of Antwerp, Belgium. PM, Pensionsmyndigheten (2016a), http://www.pensionsmyndigheten.se/1599.html. ——— (2016b), http://www.pensionsmyndigheten.se/BostadstillaggTillPensionarerStatistik.html. Rothstein, B. (1998), Just Institutions Matter, Cambridge University Press: Cambridge. Sapir, A. (2003), An Agenda for a Growing Europe, European Commission: Brussels. Socialstyrelsen (2014), Ekonomiska Analyser av Sjukvårdens Kostnader, Socialstyrelsen: Stockholm. Streeck, W. and Thelen, K. (eds.) (2005), Beyond Continuity: Institutional Change in Advanced Political Economies, Oxford University Press: New York. Swedish Fiscal Policy Council (2010), Report of the Swedish Fiscal Policy Council, Swedish Fiscal Policy Council: Stockholm. Tallberg, J.; Aylott, N.; Bergström, C.-F.; Vifell, Å. C., and Palme, J. (2010), Europeiseringen av Sverige, SNS Förlag: Stockholm. Wennemo, I. (1994), Sharing the Costs of Children: Studies on the Development of Family Support in the OECD Countries, Avhandlingsserie, Institutet för Social Forskning, Stockholm University.

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13 The French welfare state system With special reference to youth unemployment Tom Chevalier and Bruno Palier

The main components of the French welfare system clearly reflect the Bismarckian tradition of social insurance: entitlement is related to employment status and conditional upon contribution record; most benefits are earning-related; financing is provided mainly by employers’ and employees’ contributions; and the social partners are heavily involved in management. From 1945 to the late 1970s, social policies have expanded as one of the important parts of the Keynesian compromise, which underpinned the “Trente Glorieuses.” Social spending was perceived as favoring economic growth and employment, social insurance transfers were seen as consolidating social integration and (occupational) solidarity and welfare state institutions as supporting social peace. Since then, all the economic, social and political functions of the social protection systems have progressively been called into question. After a long period of crisis and resistance, social programs are progressively being reformed in order to become more adapted to the new economic and social environment. In the first section of this chapter, after first recalling the content of the Keynesian compromise in France in order to highlight the main political, economic and institutional characteristics of the French system, we will present the major reforms that have been implemented in the welfare system and emphasize the changes that have taken place in both the analysis of the problems and in the solutions put forward from the 1970s to the 2000s, in order to highlight the learning process which accompanied these reforms. Even if institutional stickiness and strong political protest against big changes have impeded any radical transformation of the French welfare state, retracing the changes in ideas will help to see the paradigmatic shift in social policy that is under way in France. In the second section, we will focus more on the problem of youth unemployment/transition in France. First, we will propose a theoretical framework that will allow understanding and mapping the diversity of the place of young people in the welfare state, by focusing on their welfare citizenship. In fact, the welfare state can promote their independence in two ways: by providing them income support, which we call “social citizenship,” or by easing their access to employment, which we call “economic citizenship.” Then, we will show that in France, young people’s social citizenship is familialized, while their economic citizenship is selective and workfare oriented. As a result, it is a “denied” youth welfare citizenship that takes place in France, as in other Mediterranean countries. 216

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The next section underlines the current trends of the welfare system by showing that a process of dualization is at play, both in the general welfare state and in youth policies, producing new kinds of inequalities. The last part of the chapter summarizes and concludes by mapping out the main characteristics of the new social policy paradigm that is reflected in these changes.

Major characteristics of the French welfare state The Keynesian compromise in French social policy The French social protection system was organized after 1945. The choices that determined the configuration of the Social Security system (the Sécurité Sociale) reflect a rejection of social assistance in favor of social insurance. In 1945, the system aimed first and foremost at protecting workers against the risks of illness, work accident and old age, and at compensating the cost of children. Social rights are acquired through the payment of social contributions that are deducted from wages, and social benefits are proportional to income levels. The management of the system was entrusted to both employers’ and employees’ representatives, in order to avoid entrusting it directly to the state. The French historical, political and institutional context of 1945 led the architects of the social security system to elaborate an ambiguous compromise, combining aims specific to France (integration of workers; pro-natalist policies), with Beveridgean principles (universalist ambition) and Bismarckian methods (social insurances). As long as France experienced sustained economic growth, oriented towards full employment, the contradictions involved in this ambiguous compromise of 1945 were resolved via a constant expansion of social security programs. The system expanded through the creation of new social insurance regimes, aimed at different social groups, but all built on a similar model to the general regime that had been set up for private sector workers in 1945. As a result, the French social protection system is one of the most fragmented in Europe (with over 600 basic pension regimes and 19 health insurance regimes). The social protection policies have long been inscribed in an expansionary paradigm, promoted by state actors, trade unions and even by employers. In the eyes of all these actors, the social protection system played a central role in the global mechanisms of economic, social and political regulation. It guaranteed a strong coherence between (Keynesian) economic policy and social policy, contributed to social cohesion and to the pacification of relations between the social partners while still leaving an important (although non-explicit) role to the state. Since the crisis of the 1970s, all of these economic, social and political functions of the social security system have been progressively called into question. While the 1970s and early 1980s were characterized by institutional path-dependence and inertia, since the 1990s the system has been slowly transformed, first through economic measures (retrenchment), then through more structural measures which have started a progressive process of dualization of the French social protection system.

From the mid-1970s to the early 1980s: institutional path-dependence The French government’s initial response to the recession of the 1970s was typically Keynesian: reflation measures that relied on increasing welfare benefits in 1974–1976 and in 1981–1982, and, in the face of rising unemployment from 1974 to 1984, an increase in the replacement rate of unemployment benefits. Countless plans were devised to deal with the recurrent Sécurité Sociale deficit, but all of them were characterized more by increases in social contributions than by reductions in social spending – there was a small reduction in health insurance 217

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reimbursements, but retirement payments and daily sickness allowances continued to increase (Palier, 2005). Even while they were lowering income taxes in the 1980s, the successive French governments struggled to balance the accounts of the Sécurité Sociale by raising social contributions rather than lowering welfare benefits. The governments of the 1970s and 1980s attempted to resolve the ongoing unemployment problem by diminishing the labour supply, preserving jobs for qualified and highly productive males, while removing other workers from the job market. In the face of rising global competition, industry adopted strategies based on high productivity, high wages and quality production, which also favored highly qualified long-term workers at the expense of unskilled workers. Labour reductions were negotiated with severance packages and early retirement in the hope that the cost of these measures would be offset by productivity gains (Kohli et al., 1991). The state endorsed these strategies by subsidizing early retirement schemes, maintaining generous unemployment benefits and developing welfare benefits that guaranteed a minimum income for people who were not in the job market. The withdrawal of older workers from the job market is apparent in the number of early retirements, which rose from 14,000 in 1971 to 705,000 in 1983 (Bichot, 1997). In 1982, the legal retirement age was lowered to 60, which also effectively withdrew older workers from the labour market. Even when increases in welfare payments were no longer on the agenda, social policy continued to feel the effects of both the recession and the new economic policies. After a failure of the reflation plan of late 1981, the then socialist government decided to progressively change their economic policies, turning them from demand to supply-side orientation. As of 1983, it was hoped that profits resulting from the new economic policies – one of the immediate consequences of which was a rise in unemployment – would lead to new investment and eventually create jobs. In the meantime, social policy was used as a buffer. Welfare benefits were supposed to act as shock absorbers on the road to halting inflation, liberalizing capital markets and the job market, and restructuring industry, which included closures in the metals industry. As a result, the number of early retirements declined only slightly in the late 1980s, social measures designed to buffer the cost of unemployment multiplied1 and, in 1988, the minimum income program (Revenu Minimum d’Insertion, or RMI) was introduced. It was as if the economic policy regime, which adopted a new paradigm in the 1980s, had been severed from the social policy regime, which remained anchored in Keynesian schemas. Three factors are responsible for the persistence of this gap throughout the 1980s. First of all, institutional inertia and path dependence made any wholesale reform of social protection difficult. Second, social policies were used to soften the social consequences of economic policy shifts. Third, economic policy was increasingly defined at the European level, whereas social policy remained within the competence of national governments, making it difficult to develop the two in a coherent fashion. In the 1990s, however, the French government shifted towards a new social policy paradigm, one that was more in keeping with the new economic paradigm and involved curbing or even cutting public social expenditure.

The early 1990s: timid retrenchment By the early 1990s, the Common Market was virtually complete and European countries were preparing to introduce a single European currency and meet the other criteria of the Maastricht Treaty, which was adopted in 1992. In the Continental European countries, where social protection schemes are funded by social contributions, more and more economic and political actors were complaining that social contributions weighed too heavily on labour costs, hindering business competitiveness in the Common Market. The Maastricht Treaty criteria encouraged 218

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member states to reduce public deficits and debt, which meant checking or even cutting public expenditure and social contributions. In France, the resurgence of unemployment in 1991, the 1993 recession, and the need to fulfill the Maastricht criteria by 1996 played a significant role in three major reforms: unemployment benefits in 1992, private sector pension schemes in 1993, and the Juppé plan to reform the whole Sécurité Sociale in November of 1995. This time, the reforms were geared explicitly towards slashing benefits and curbing increases in social spending.The unemployment reform’s Allocation Unique Dégressive (AUD) linked unemployment benefits to the length of time an individual was affiliated with the insurance program and reduced the amount paid out in unemployment considerably. Moreover, fewer people were compensated by unemployment insurance: from 52.5 percent of all unemployed (according to the ILO definition) in 1992, down to 42.2 percent in 1997 (Daniel et al., 1999). The consequences of the 1993 pension reform were not immediately apparent, but indexing retirement benefits on prices led to a 0.5 point per year gap in the level of retirement benefits compared to salaries, and in December of 2001 the Conseil d’Orientation des Retraites reported that, taking into account all retirement schemes, the replacement rate should drop from 78 percent to 64 percent by 2040. In the field of health care, steady increases in the various co-payments that insured patients were expected to pay for daily hospital charges, pharmaceuticals and doctors’ fees gradually reduced the coverage guaranteed by the national health insurance fund. These declines in social insurance coverage have resulted in an increasing segment of the population relying on need-based minimum social allowance payments. The number of beneficiaries of the Specific Assistance Allowance (Allocation de Solidarité Spécifique), a need-based compensation for the unemployed who no longer qualify for unemployment benefits, rose from 34,800 in 1992 to 467,000 in 1995 (  Join-Lambert, 1997: 576). Beneficiaries of the RMI minimal income scheme also increased significantly in these years, with a 21.2 percent rise in 1993. Overall, the number of minimum social allowance beneficiaries has grown steadily, from 2.3 million in 1970 to nearly 3.3 million in 1995. In total, if one adds the partners and children of beneficiaries, 6 million people – about 15 percent of French households – are subsisting on some form of minimum social allowance, a figure that has remained constant to this day. The contraction of the social insurance system thus led to an increase in the role of non-contributory benefits that were heretofore limited to the neediest. This, in turn, generated a new public debate about “poverty traps” and the lack of work incentives in the social protection system, prompting the adoption of new measures aimed at making it more conducive to employment.

The turning point in the late 1990s: structural changes and activation policies Social policy reorientation in the late 1990s focused in large part on the negative effects that social protection had on employment. Labour costs were supposedly too high and prevented companies from hiring, and welfare payments were supposedly too generous and placed no demands on recipients, creating disincentives for the unemployed to return to active employment. Two typically supply-sided sets of policies were developed to deal with this: policies to lower the cost of labour and activation policies that encourage individuals to join or remain in the job market or stimulate the labour supply. During the 1980s, a number of economists and employer associations had intensified their criticism of social contributions – the so-called social charges – claiming that they crippled company profitability and prevented businesses from hiring less qualified workers. By the 1990s, 219

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lowering employers’ social contributions and changing the way that social protection was financed had become a primary policy objective, but change came gradually. Initially, policies to reduce social contributions were applied specifically in order to affect certain targeted populations, such as to support the hiring of young unskilled or long-term unemployed workers, but later they were applied to all employees at the lower end of the salary scale. To make up for the drop in receipts, taxes were raised or introduced, including taxes on tobacco and alcohol. A major innovation was introduced in 1990 with the creation of the Contribution Sociale Généralisée (CSG), a tax on all income – deducted at the source and including indirect income and income on capital – that was earmarked for social expenditure. Initially set at a low rate of 1.1 percent of income, it was later raised considerably, and in 1998 it was set at 7.5 percent. Between 1993, when large-scale reductions in employer contributions were introduced in the context of a “Five-Year Law on Employment” adopted under the Balladur government, and 1998, when some health insurance contribution was replaced by the CSG, there was a transformative shift in thinking about financing for social protection. Taxes were to play an increasing role, particularly in funding non-contributory payments such as for health care, the family allowance and the minimum social allowance. Social contributions constituted 80 percent of the funding for welfare benefits until the 1980s, but had dropped to 66 percent by 2000 (Palier, 2005). In keeping with the objective of lowering labour costs, the structure of social protection funding was thus considerably modified.The type of solidarity that comes into play was thereby shifted from work-related solidarity to a more targeted “national” solidarity, and the legitimacy of social protection actors also changed, because funding through contributions had been managed by the social partners whereas funding via taxes was managed by the state. Employment policies have also undergone a paradigm shift in the last decade. Throughout the Keynesian period, unemployment was viewed as the consequence of an ailing economy, which could be nursed back to health by stimulating consumption and demand. Unemployment benefits were an entitlement, earned through prior payment of contributions, and they served to buoy consumer capacity during times of high unemployment, thus preventing an economic recession from sliding into a 1930s-style depression – in other words, they were an automatic stabilizing mechanism. This failed to explain, however, why the reflation policies of the late 1970s and early 1980s were unable to lower unemployment. The reinterpretation of unemployment that began to dominate thinking in the 1980s focused on job market supply factors – labour costs and incentives or disincentives created by legislation and welfare policies – rather than on consumer demand. Unemployment was no longer viewed as a collective ill, the fallout of an ailing economy, but rather as the result of individual, voluntary behavior patterns. This new perception of the unemployment problem was gradually translated into social activation policies. The first round of such policies in the late 1980s was aimed at young people and the longterm unemployed. In 1988, these policies were expanded by the RMI, which required beneficiaries to report on job-searching activities, and in 1992 by the AUD, which encouraged the unemployed to seek reemployment by limiting the term of benefits. In 2001, activation policies were finally implemented across the board by a reform that changed the unemployment benefit into a job-seeking allowance (Allocation pour la Recherche d’Emploi or ARE) wherein beneficiaries must be committed to a specific plan for returning to employment (Plan d’Action pour le Retour à l’Emploi, or PARE). Another measure introduced in 2001 provides a tax credit or “employment bonus” (Prime pour l’Emploi) to low-wage earners, as a way of ensuring that they can earn more by working than by staying home and receiving unemployment benefits. In 2008, following this same trend, the Revenu de Solidarité Active (RSA) was introduced. The RSA,

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which provides a state-financed supplement to low-wage earners and exempts their employers from paying social contributions, guarantees a better income to those who work than RMI provides for the unemployed and is, in the long run, expected to replace the RMI. These changes in the financing of social protection, unemployment insurance and employment policies mark a more global change in social protection, which, instead of stimulating demand as in the past, has gradually turned towards supply. Welfare benefits were formerly perceived on the collective level as a means of boosting economic activity by enhancing consumer capacity and thus demand; and at the individual level they were perceived as an entitlement acquired by paying the social contributions that were deducted from wages (wherefore the concept of deferred wages). Now, however, public social expenditure at the collective level is increasingly perceived as a cost or “social charge” that must be curbed; and at the individual level, the new welfare benefits are less of a quid pro quo for past activity during which contributions were paid than a quid pro quo for current or future activity (training, job search and reemployment). Another area of social protection where this philosophy of activation has played a role in recent years is that of pensions. In a demographic context increasingly characterized by an imbalance between the active and retired population, pension reforms have been geared towards making employees work longer. The 2003 Fillon Law reduces the pensions of workers who retire before the required number of years – 40 beginning in 2008, 41 as of 2012 – and offers a premium to those who work longer than required. A number of measures have also been geared towards curbing the rise in early retirements, highlighting the transformation in thinking since the 1980s, when early retirement was used as an instrument for solving unemployment problems. In recent years, the French pension system has undergone several waves of reforms. In November 2010, the right-wing Fillon government introduced a reform of statutory pension schemes, whose most significant measure was a gradual increase of the minimum statutory retirement age from 60 to 62 years by 2018.The reform also tightened eligibility criteria for the pre-existing early retirement scheme for workers with long careers, while simultaneously creating a right to early retirement (from age 60) for workers with a partial incapacity to work. Faced with growing budgetary pressures, the same right-wing majority decided in November 2011 to accelerate the pace of the 2010 reform and to increase the minimum statutory retirement age to 62 years by 2017 instead of 2018. In the summer of 2012, the new left-wing Ayrault government decided to reintroduce the possibility to retire at age 60 (instead of 61 or 62 as planned by the 2010 reform) for those people who started working before age 20. This was done through changes in the early retirement scheme for workers with long careers2 and was to be financed through a gradual increase in social security contributions. The decree also enlarged the non-contributory periods that are taken into account in the calculation of workers’ contribution record: two additional semesters of maternity leave and of unemployment can now be taken into account. Finally, in the autumn of 2013, the Ayrault government put forward a new pension reform which included: an increase in employee and employer contributions (by 0.3 percentage points each between 2014 and 2017); a gradual increase in the minimum contribution required for a full pension from 41.5 years for people born in 1955 to 43 years for people born in 1973 (i.e. effectively for those retiring from 2035); the creation of a personal account for the prevention of hard working conditions (compte personnel de prevention de la pénibilité); as well as a series of changes aimed at improving pension adequacy for women, youths and workers employed in non-standard forms of employment. The reform was passed by Parliament in January 2014.

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Special focus: the persisting problem of youth unemployment Varieties of youth welfare citizenship Young people have been severely hit by the recent economic crisis, and their social situation has worsened (Eurofound, 2014). As a result, their access to social rights have been put on the agenda, addressing the issue of their “social citizenship.” Studies on the welfare state have focused on the issue of social citizenship, which is granted implicitly to adult citizens. In fact, as far as the life course is concerned, this concept relies on the clear distinction between childhood and adulthood, and on the fact that social citizenship concerns adulthood. Within the life course theory, scholars have indeed shown that the state has institutionalized the “tripartition of the life course” by separating childhood, adulthood and old age (Kohli, 1986). During the 19th and 20th centuries, the development of the education system institutionalized the period of childhood, whereas the implementation of pension systems institutionalized old age. The period of adulthood represents the time of work. Subsequently, children and adults do not have the same social citizenship status in the welfare state: on the one hand, children are seen as dependent on their parents, and therefore can only access benefits indirectly as dependents, whereas on the other hand, adults are seen as independent, and can claim benefits on their own. This distinction between childhood and adulthood implies a straightforward and smooth transition from childhood to adulthood. However, youth studies have shown to what extent this transition has been transformed since the seventies and the shift towards a post-industrial era, and how much it has become more and more complex. First, the age at which individuals become adults has been postponed, leading to a longer period for childhood, mainly because of the extension of the duration of studies (Cavalli and Galland, 1995). Second, the different markers of the transition to adulthood, such as leaving the parental home, entering the labour market, getting married and having a child have disconnected from one another and are not crossed at the same pace anymore (Billari, 2004). Third, transitions to adulthood have become reversible, reflecting a larger process of “destandardization” of trajectories (Buchmann and Kriesi, 2011), leading to “yo-yo transitions” (Walther, 2006). As a result, a new period of life has emerged, between childhood and adulthood, which is the period of youth.The welfare state has addressed this new issue in very different manners across Europe. Becoming an adult in the welfare state perspective means becoming financially independent, that is getting access to an income without relying on one’s family anymore. This independence can thus be achieved either through the market, that is by entering the labour market and accessing paid employment, or by the state, that is by receiving social benefits.The state can therefore intervene in two ways that we need to distinguish in order to understand how the transition towards the financial independence of young people is structured by the welfare state: either it provides income support or it tries to ease the transition between education and work (or both). Each arrangement of these policies leads to a certain type of what we call “youth welfare citizenship.” First, income support is needed during the period of transition that is youth. In this period of time a lot of young people are not “commodified” (meaning they do not have an income through paid employment), that is they either are in education (because of the extension of the duration of studies) or do not have a job (because of growing youth unemployment). As a result, if we want to understand the way the welfare state provides income support to young people, we have to take a look at all social benefits that young people can claim for when they are not employed: education-related benefits (grants, loans),3 social assistance and family policies (family allowances and tax relief for families). Following the long tradition of welfare research, we can say that this first problem addresses the issue of “social citizenship” for young people. 222

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We distinguish two figures of social citizenship for young people. On the one hand, social citizenship can be familialized when young people are conceived of as children. In this perspective, youth is considered as the extension of the period of the life course named childhood. Accordingly, their parents are still deemed to support them, as long as they are financially dependent. We can therefore find late age limitations, around the age of 25, in order to get the status of independent in social security, which would lead to a low coverage by social benefits for people under that age. As childhood means for individuals to be in education and dependent on their parents, the family policy will be preferred to support young people in higher education. On the other hand, social citizenship can be individualized when young people are conceived of as adults. Subsequently, parents are no longer supposed to support their children, even when they pursue their studies: young people in higher education can benefit from a universal support, not depending on parental income, with no room for the family policy, which only covers childhood and up to secondary education. In this case, young people can claim for social benefits as independent rather early, around the age of 18, leading to a high social coverage. The second dimension has to do with the integration of young people into the labour market. As new entrants in the labour market, young people are more likely to face unemployment and non-standard forms of employment (Fagan et al., 2012). The welfare state can also act upon this transition from school to work, but in a different manner than just providing an income, in order to ease the entry of young people into the labour market. Inasmuch as the financial independence of young people is achieved through the access to employment in that regard, we call this dimension “economic citizenship.” The school-to-work transition depends heavily on young people’s skills (Allmendinger, 1989; Müller and Gangl, 2003), even more nowadays in the context of a knowledge-based economy. For public intervention, the crucial element at stake is the focus on young people’s skills. Education policies and labour market policies are concerned here. The first strategy is encompassing.The education system aims at providing some skills to every young person, leading to few school dropouts. The objective is primarily to boost access to education, in what can be called a “learnfare” or “learn-first” (OECD, 2010) perspective. The state intervention in the labour market in order to help young people in difficulty to get a job will be supply-side oriented, by providing training to young people. Active labour market policies (ALMP) will therefore have the function of “enhancing human capital” and “upskilling” (Bonoli, 2010). The second strategy is selective, in the sense that it provides skills only to a part of the youth population, because of the elitism of the education system (skills for the best). As a result, in these cases education inequalities are important, and one can see a high number of school dropouts. In that case, for young people in difficulty on the labour market, the policy will not be to provide some training, but primarily to boost the employment of these young people in a “workfare” or “work-first” strategy. In order to help the low skilled in difficulty on the labour market, the state fosters a demand-side policy, aimed at lowering the youth labour cost, for instance through sub-minimum wages or social contributions exemptions.We will show that there is familialized social citizenship in France, together with a selective economic citizenship, thus leading towards what we call a “denied” youth welfare citizenship.

The French case: a denied youth welfare citizenship The origin of the familialization of social benefits for young people in Bismarckian countries has to be found in their civil codes. In France, article 203 of the Civil Code states that married couples have to support their child, and article 371–2 expands this obligation to all parents, married or not, also towards their child after he or she reaches his or her civil majority, as long as he or she is financially dependent. 223

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Familialization also gives a great importance to the family policy, through family allowances as well as tax relief for parents, as young people are seen as children. In France, family allowances are available for parents with at least two children below the age 20. Furthermore, tax relief is also available for parents: for instance, young people can be attached to the fiscal household of their parents until they reach 21, and 25 when they are in higher education. Student support follows this logic. Grants are supposed to complement the parents’ aid and not replace it. That is why the entitlement to student support, as well as its rates, is calculated according to parental income. As a result, student support concerns rather few students and their rates remain rather low: in France, grants4 concerned around 35 percent of students in 2012–2013. This familialization can also be found in social assistance schemes. In France, an age limitation does not allow young people below the age of 25 to claim for the basic income scheme. Under that age, young people are seen as dependent in social security legislation: their parents are supposed to take care of them. That is why the delivery of that benefit, even after 25, is in theory conditional on parental legal obligations towards their child. Likewise, the rate of the benefit also depends on declared family transfers. This architecture of income support for young people is therefore highly stratified: familialized support for young people in higher education and almost no support for low-skilled youngsters (Chevalier and Palier, 2014). It reflects the segmentation produced by the elitism of the integration strategy, and of the skill formation system especially (Baudelot and Establet, 2009), which leads to high levels of school dropouts and many young people with low qualifications in difficulty in the labour market. In order to address this issue, public intervention has opted for a demand-side policy: instead of upskilling these low-skilled young people, the emphasis has been put on the creation of atypical jobs for them. On the one hand, the youth labour cost has been lowered with important social contributions exemptions since the 1977 “Pacts for Employment,” which were supposed to fight growing youth unemployment (Aeberhardt et al., 2011). On the other hand, there have been many job creations in the public sector, up to the recent “Contracts for a Future.” Although trainingoriented ALMP is an important part of the so-called Youth Integration Policy, it mostly benefits already qualified young people and not the low skilled (DARES, 2012): it reflects the elitism of the strategy that delivers skills only to one part of the youth. This atypical status in the labour market (selective workfare economic citizenship) together with the absence of the status of independent in social security (familialization of social citizenship), therefore leads to what we call a “denied” youth welfare citizenship.

Current and future trends At its inception the French Sécurité Sociale was meant to attain Beveridgean goals of universality through the social insurance means of Bismarck. Because of the reforms implemented during the last 30 years, France’s compulsory social insurances are no longer all-encompassing. This has opened up a space for the development of other types of social protection mechanisms, both public (state-run) and private. These changes have resulted in multiple dualizations in the French welfare system: the development of two worlds of welfare within the public system; the addition of a private component to the public one; and the division of the population between the insured insiders and the assisted or activated outsiders. Two distinct worlds of welfare have come to coexist in the public system. One is the remaining realm of social insurance, consisting mainly of old-age pensions and unemployment insurance, where what is called in France “professional solidarity” is central and benefits are still

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acquired through work, albeit linked more closely than before to the amount of contribution paid. The social partners have kept their hands on the development of these insurances, even though the “shadow of hierarchy” is ever more visible. This world of social insurance can no longer offer comprehensive coverage, that is cover the whole population and provide the insured with sufficient benefits to sustain their standard of living. The second world of welfare is one of what is called in France “national solidarity” consisting of health care, family benefits and policies aimed at fighting social exclusion. Here, eligibility is based on need and citizenship, benefits are either universal (for health and family allowances) or means-tested (Couverture Maladie Universelle, or CMU, and RMI and other minimum incomes), and they are financed from national taxes (especially CSG) with the state playing a central role. In France, retrenchment consisted mainly of stricter eligibility criteria in social insurance, and as a consequence fewer people are covered by social insurance and those covered are less well covered. This shrinking of social insurance leaves space both underneath the public system (for covering the poorest with minimum incomes) and above it (for private voluntary components, i.e. private pension funds and private health insurances). This is a new architecture for the French welfare system, with social insurances still central but no longer hegemonic. This new architecture has created new forms of vertical dualism in society. The French population itself seems to be increasingly divided into on the one hand, those who can rely on a rather generous social insurance program and continue to have access (thanks to their employers or their own wealth) to private complements, and on the other hand, those who have fallen out of that system and are dependent on minimum benefits. To the latter group, one should probably add those being “activated” into atypical contracts under which they benefit from second rank labour and social protection (Clegg, 2007; Palier and Thelen, 2010). Between those on minimum incomes (10 percent of the French population) and the 25 percent of the working population with an atypical working contract (fixed term, part time, with lower wages than normal, RSA and other subsidized jobs), it seems that around a third of the French population does not participate in the “normal” labour market and social protection arrangements. French social protection reforms have thus contributed to increased inequality and divide society between insiders and outsiders (Palier and Thelen, 2010). These trends have been accompanied more than they have been truly contested by the social partners. As seen before, most of the retrenchments in social insurance benefits were negotiated on the basis of a distinction between “insurance” and “solidarity.” This led to the separation of the two worlds that were once associated when the system was aimed to reach Beveridgean goals through Bismarckian means. Likewise, we can see a similar process concerning young people. First, the selective economic citizenship that we find in France produces important education inequalities, which have huge consequences when low-skilled young people try to enter the labour market. Second, other public policies then reinforce these inequalities. In fact, on the one hand, the familialization of benefits is the main way to protect young people in France, especially those in higher education. Yet, not only is this familialization anti-redistributive, as it provides relatively more support for high-income families, but it concerns especially young people in higher education, who do not come from low-income families and will be less in difficulty once they are in the labour market. On the other hand, the growing difficulties of the most vulnerable young people regarding their entry into the labour market have fostered the development of ALMPs specifically targeted to young people (the so-called Politique d’Insertion). And not only have these policies institutionalized an atypical status for those young people in the labour market, but almost no safety net is available for them, as they cannot claim social assistance. As a result, far from mitigating them, this

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dualization of public policies towards young people has actually reinforced inequalities among them in France (Chevalier and Palier, 2014).

Summary and conclusion On the one hand, we have seen that the French welfare state belongs to the continental Bismarckian welfare regime. Still, it has evolved a lot through series of reforms, which we can also identify in other Continental countries (Palier, 2010). On the other hand, as far as young people are concerned, France leans more towards Mediterranean countries as social aids are highly familialized, and policies supposed to boost their employment are not focused on human capital, and produce great inequalities among them. But in both realms, a process of dualization is at display, producing and reinforcing new kinds of inequalities. As social policies are re-oriented towards the supply side, it is clear that in France, as elsewhere, the objectives of social policy have undergone fundamental changes. Before, welfare was mainly conceptualized as a way of guaranteeing a substitute income for people who can no longer work, temporarily or permanently – thus decommodifying the individual and insuring that citizens are not left at the mercy of market forces. Benefits were conceived as an entitlement, earned over years of social contributions. Increasingly, social policies are conceived as instruments for modifying individual behavior, in particular with regard to employment where they make an active attempt to recommodify the citizen and spur the economy – not by supporting household consumption, but by encouraging citizens to work as much as possible. The new goal of social policy is, in effect, to create a favorable environment for private sector activities. The decreases in employer social contributions, wage moderation and the new methods of financing social protection (such as CSG, which taxes individual income but not companies) all favor business and facilitate profit-making. This is in keeping with the dominant economic paradigm that today’s profits are tomorrow’s investments and the day after tomorrow’s jobs. Some social protection activities are now conceived as activities that can be privatized and positioned to contribute to the development of post-industrial economies. More and more international organizations are encouraging governments to develop private social protection activities – pension funds that are capable of attracting and developing investments, medical research and insurance that are conceived as high-value-added industries, and social and health services to people. France has embarked on this path not only with its social activation programs, but with tax incentives for retirement savings (Plan d’Épargne Retraite Populaire in the Fillon law) and by encouraging mutual companies and private insurance companies to assume certain health care expenditures. The Sécurité Sociale reimbursement rate for outpatient health care in France is rapidly declining, paving the way for “rampant privatization” (Hassenteufel, 1998). One effect of these efforts, of course, is to shift jobs – and new job creation – from the public to the private sector. The French social protection system is thus gradually supposed to become an instrument of competitiveness: via decreases in employer social contributions and development of private social protection activities; via decreased taxation and increased control of the state over the rise in social expenditure; and via activation policies.

Notes 1 These policies were particularly meant to create subsidized jobs for young people and the long-term unemployed, which often install the beneficiary populations on the margin of the normal job market.

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2 Prior to this 2012 reform, it was possible for a worker to retire before age 60 if he or she had started working before age 18 and had paid social security contributions for two more years than the required minimum contribution record (i.e., in 2012, 43 years instead of 41 years). Following the 2012 reform, workers can retire at age 60, if they started working at age 18 or 19 and reached a full minimum contribution record. 3 We use the term “welfare citizenship,” which addresses the issue of financial independence in general, in order to distinguish it from the concept of “social citizenship,” which concerns more the issue of the access to social benefits in particular. See also Chevalier (2016). 4 Loans are marginal compared to grants in France.

References Aeberhardt, R.; Crusson, L., and Pommier, P. (2011), Les Politiques d’Accès à l’Emploi en Faveur des Jeunes: Qualifier et Accompagner, http://www.insee.fr/fr/ffc/docs_ffc/ref/FPORSOC11m_D2_PEjeun.pdf. Allmendinger, J. (1989), Educational Systems and Labor Market Outcomes, European Sociological Review, Vol. 5, No 3, pp. 231–250. Baudelot, C. and Establet, R. (2009), L’Élitisme Républicain : L’École Française à l’Épreuve des Comparaisons Internationales, Seuil: Paris. Bichot, J. (1997), Les Politiques Sociales en France au XXe Siècle, Armand Colin: Paris. Billari, F. (2004), Becoming an Adult in Europe: A Macro(/Micro)-Demographic Perspective, Demographic Research, Special,Vol. 3, No. 2, pp. 15–44. Bonoli, G. (2010), The Political Economy of Active Labor-Market Policy, Politics & Society, Vol. 38, No. 4, pp. 435–457. Buchmann, M. C. and Kriesi, I. (2011), Transition to Adulthood in Europe, Annual Review of Sociology, Vol. 37, No. 1, pp. 481–503. Cavalli, A. and Galland, O. (1995), Youth in Europe, Pinter: London. Chevalier, T. (2016), Varieties of Youth Welfare Citizenship: Towards a Two-Dimension Typology, Journal of European Social Policy,Vol. 26, No. 1, pp. 3–19. Chevalier, T. and Palier, B. (2014), The Dualization of Social Policies Towards Young People in France: Between Familialism and Activation, in L. Antonucci, M. Hamilton, and S. Roberts (eds.), Young People and Social Policy in Europe, Palgrave Macmillan: Basingstoke. Clegg, D. (2007), Continental Drift: On Unemployment Policy Change in Bismarckian Welfare States, Social Policy & Administration,Vol. 41, No. 6, pp. 597–617. Daniel, C.; Tuchszirer, C., and Join-Lambert, M.-T. (1999), L’Etat Face aux Chômeurs. L’Indemnisation du Chômage de 1884 à Nos Jours, Flammarion: Paris. DARES (2012), L’Apprentissage en 2011, DARES Analyses, No. 80, pp. 1–8. Eurofound (2014), Social Situation of Young People in Europe, Publications Office of the European Union: Luxembourg. Fagan, C.; Kanjuo-Mrcela, A., and Norman, H. (2012),Young Adults Navigating European Labour Markets: Old and New Social Risks and Employment Policies, in T. Knijn (eds.), Work, Family Policies and Transitions to Adulthood in Europe, Palgrave Macmillan: Basingstoke. Hassenteufel, P. (1998), Les Réformes des Systèmes de Protection Maladie Entre Libéralisation et Étatisation: Une Comparaison Européenne (Allemagne, France, Grande-Bretagne), Revue Internationale de Politique Comparée,Vol. 5, No. 2, pp. 315–341. Join-Lambert, M.-T. (ed.) (1997), Politiques Sociales, Presses de Sciences Po, Dalloz: Paris. Kohli, M. (1986), The World We Forgot: A Historical Review of the Life Course, in V. W. Marshall (ed.), Later Life:The Social Psychology of Ageing, Sage: Beverly Hills, CA. Kohli, M.; Rein, M.; Guillemard, A.-M., and Gunsteren, H. van (eds.) (1991), Time for Retirement: Comparative Studies of Early Exit from the Labor Force, Cambridge University Press: Cambridge. Marshall,T. H. (1950), Citizenship and Social Class and Other Essays, Cambridge University Press: Cambridge. Müller, W. and Gangl, M. (2003), Transitions from Education to Work in Europe:The Integration of Youth into EU Labour Markets, Oxford University Press: Oxford.

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OECD (2010), Off to a Good Start? Jobs for Youth, OECD: Paris. Palier, B. (2005), Gouverner la Sécurité Sociale : Les Réformes du Système Français de Protection Sociale Depuis 1945, Presses Universitaires de France: Paris. ——— (ed.) (2010), A Long Goodbye to Bismarck? The Politics of Welfare Reform in Continental Europe, Amsterdam University Press: Amsterdam. Palier, B. and Thelen, K. (2010), Institutionalizing Dualism: Complementarities and Change in France and Germany, Politics & Society,Vol. 38, No. 1, pp. 119–148. Walther, A. (2006), Regimes of Youth Transitions: Choice, Flexibility and Security in Young People’s Experiences Across Different European Contexts, Young,Vol. 14, No. 2, pp. 119–139.

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14 The Belgian welfare state system With special reference to “targeting within universalism” Bea Cantillon, Diana De Graeve and Natascha Van Mechelen

The recent history of the Belgian welfare state is in part shaped by widespread economic and social changes; in part it is the upshot of the unique set of assets, problems and potentials of its own architecture. Social needs as well as the possibilities and constraints to achieve more adequate social protection within advanced welfare states have changed quite dramatically in the past three decades due to many interacting factors: deindustrialization, skill-based technological change, intensified international competition, feminization of labor markets, declining household size and, more recently, aging and increasing health care needs. As a consequence of the institutional inertia associated with Bismarckian institutions and layered welfare states, the response of the Belgian social security system came rather late. Moreover, it was adapted to the national context.The strengthening of targeted elements in Belgian welfare provisions provides a clear illustration of institutionally bounded and contingent adaptation to new social risks. With a view to improving efficiency and containing cost, greater selectivity was imposed, but within the universal framework. In this chapter we will discuss the implementation of so-called targeting within universalism within the Belgian welfare state, with a specific focus on the health insurance system. Belgium has a compulsory but rather liberal social health insurance system where both patients and providers enjoy much freedom of choice. Out-of-pocket payments serve as an instrument for patient accountability and are in a cross-country perspective sizeable. This chapter provides a description of recent policy measures aimed at reducing the burden of out-of-pocket payments for vulnerable families through selective targeting. This chapter discusses how the shift towards increased targeting and a stronger emphasis on work, social investment and cost containment in Belgium has been colored by its institutional setting. The special focus of this chapter is on the health insurance system and its maximum billing system.

The Belgian welfare state system Belgium is one of the oldest and most developed welfare states in the world. Traditionally it belongs to the group of countries that were typified by Esping-Andersen (1996) as “conservativecorporatist” with a highly developed “Bismarckian” social security system firmly based on the male industrial worker’s model, a high degree of decommodification by means of social 229

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insurances and a labor market that heavily relies on social dialogue. Subsidiarity is the very core of Belgian welfare institutions: social partners participate to a significant degree in policy making and implementation while private non-profit organizations are heavily involved in education and health care services. Social protection systems grew from the bottom up as gradual solutions for the big social issues resulting from industrialization in the 19th century. Local innovative actions and practices developed within the framework of a young unitary state. The institutions emerging from these processes developed steadily with increasing support from the state. After World War II, these practices grew into comprehensive and ever more all-encompassing systems of social insurances and services. They were the result of a post-war social pact between labor and capital representing a political compromise between Christian Democracy, socialism and liberalism (van Kersbergen and Hemerijck, 2004). The historical development of Belgium’s welfare state resulted in social insurances that organize solidarity and responsibility within the boundaries of socioprofessional groups. At the same time, targeted social welfare remained marginal while services have become increasingly universal.

Stasis amid change After the “Trentes Glorieuses” (Fourastié, 1979), the moment Belgium reached a high level of maturity coincided with a period of social and economic upheaval. Since the beginning of the 1970s growth started to slow down, unemployment rose and the post-war institutions of the Belgian Social State seemed incapable of dealing with the consequences of the massive entry of women into the labor market, changing family relations, globalization and technological change (Taylor-Gooby, 2004; Bonoli, 2005). Designed to cope with traditional industrial social risks such as sickness, disability and old age, the welfare state had to set out in search of adequate responses to increasing welfare dependency and ensuing costs on the one hand and a set of unfamiliar new challenges and newly emerging social risks, such as structural unemployment, possessing low skills, single parenthood, work-life balance and the organization of care for children and frail elder persons on the other. Moreover, the Belgian welfare state increasingly has had to deal with regional issues between the two language communities, which were strongly and increasingly connected with socioeconomic inequalities and consequently with the institutions of the welfare state. Hence, with a Bismarckian architecture and increasing regional cleavages Belgium possessed all the ingredients to become a typical example of a “frozen welfare state” (Hemerijck and Marx, 2010). In the wordings of Esping-Andersen (1996), the first period of Belgian adaptation to the social and demographic transitions can indeed be characterized as “welfare without work.” Clearly, in the 1970s and 1980s the first line of defense consisted of the traditional social security system. A high cost of labor, uncontrolled wage development, a strict regulation of the labor market and political tensions between the regions hindered structural reforms. The Belgian welfare state continued to be geared primarily to providing social benefits, so that the burden of the unfolding employment transition and changing women’s role was borne almost entirely by social security. The employment issue associated with the post-industrial transition remained unresolved with unemployment rates soaring from 2.5 percent in 1974 to 12.3 percent in 1985. However, poverty did not increase: the redistributive issue was adequately addressed through social transfers. At that stage, Belgium was a typical example of the so-called Continental European route which was identified by Iversen and Wren (1998) in their seminal article on the Social Service Trilemma. The route was characterized by a constellation of low employment, high social expenditures and low poverty rates. 230

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Eppur si muove1 However, under pressure of Europeanization, the persistent economic, social and demographic transformations, and the need to accommodate regional tensions, the Belgian welfare state started to adapt, reluctantly at first, always with a high degree of caution and prudence but, with hindsight, in the same direction that other rich welfare states had taken. Since the 1990s, under severe fiscal discipline, Belgium not only started to adapt to the “new economy” and changing women’s roles, it also saw its power leaking away towards its regions and to Europe. The EU presented itself increasingly as an important player: the road to the eurozone played a significant role in the transformation of Belgian social policy. Internally, successive state reforms caused a thorough rescaling. Today Belgium is a typical example of a “layered welfare state.” The regions are in charge of most “social investment” related policies (child and elder care, education, health prevention, active labor market policies) while the federal government is competent for pensions and social security, thereby generating major redistribution flows from the richer North to the less affluent South of the country, leveling out an important part of the socio-economic differences (Cantillon and De Maesschalck, 2007). As a consequence of the resistance of Bismarckian institutions (Palier, 2010) and divergent views held on either side of the linguistic divide regarding social and economic reforms, the Belgian welfare state started to adapt within the confines of the prevailing system, restricted by the laws of path dependency. Subsequently, under pressure of unsustainable budgetary imbalances and supported by European discourse and policy, it developed a stronger common focus on work, cost containment, family policy as a productive factor and investment in human capital. The most important rationale of consecutive work-centered welfare reforms was the widely supported belief in welfare through work, as reflected in the fight against unemployment traps, activating benefit recipients, the alleviation of labor costs, investment in human capital, imposing restrictions on early retirement schemes and subsidizing low productive labor.The redistributive impact of these measures has been considerable. Especially the substantial reduction of taxes and social contributions on low wages2 have played an important role in bridging the gap between stagnant gross minimum wages and growing average wages (Cantillon et al., 2015). Costs were reduced by allowing minimum benefits in social security and social assistance schemes to erode vis-à-vis average wages3 and imposing greater selectivity. Greater selectivity was introduced through increased reliance on activation programs, stricter eligibility requirements and increased monitoring and sanctioning, and by shifting “by default” responsibilities to private actors especially in the case of health care. Greater selectivity was further imposed by implementing so-called targeting within universalism, that is providing additional help for those who need it most, within universal programs (e.g. granting supplementary child cash benefits to long-term unemployed and single parents). Similarly, as a reaction to increasing co-payments for medical care, higher reimbursements were introduced for vulnerable groups. Later, the “maximum billing for medical costs” (MAB) was introduced putting a ceiling on the amount of copayments to be paid by households. These MAB-ceilings increase with net taxable income but are nearly constant as a share of that income (Schokkaert et al., 2008). In the field of family policy, subsequent governments’ investments aimed to remove unequal treatments and disincentives to female employment and balancing paid work and family duties. Welfare reforms included the implementation of career break schemes and the expansion of parental leave schemes, childcare and long-term elder care services (Esping-Andersen, 2002; Ghysels and Van Lancker, 2011). Regional governments also pursued policies that seek to enhance the long-term development of human capital, for example early childhood services, 231

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a focus on equal opportunities in education and encouraging lifelong learning and vocational training (OECD, 2006; Esping-Andersen, 2008; Kim and Pelleriaux, 2010; De Rick et al., 2014).

The changing welfare state: employment, social spending and poverty Although social protection schemes were moving towards re-commodification, more selectivity and conditionality, the basic features of the architecture of the Belgian welfare remained largely unchanged. Until today, institutions continue to be marked by a strong emphasis on the principle of universalism, thereby making primarily use of the modus operandi of work-related social insurances. Although the number of social assistance beneficiaries increased dramatically over the years, today 95 percent of social protection spending remains insurance based (Eurostat ESSPROS data). Likewise, although the use of additional private pensions and health care insurance schemes has been steadily on the rise the collective schemes remained by far dominant. In the course of the last decade the population covered by private health insurance has grown from 63.8 percent (2003) to 79.6 percent (2011). However, private health insurance only complements coverage of socially insured services by covering all or part of the residual costs not otherwise reimbursed (e.g. co-payments and hospital supplements) and its role remains limited.4 Also, the principles of open access and freedom of choice in health care and education stay as good as intact. Nevertheless, recent policies were geared to get better control over school inflows in order to attain a better social mix in compulsory education, to channel patients more to primary care and to improve the monitoring of spending behaviors of practitioners and hospitals. Finally, in the same vein, although there has been an ongoing strong emphasis on the reduction of labor costs (both for employers and employees) welfare state spending continues to rely predominantly on labor. Today, almost 60 percent of spending on social insurance is based on employees’ earnings (FOD SZ, 2011). Although some will argue (not without reason) that the reforms came too late and were insufficient overall, they seem to have achieved a degree of success. Employment started to grow and this gradually allowed the Belgian welfare state to shift resources to health care, pensions and childcare, hence responding to social needs in the field of aging, well-being and social investment. In absolute terms, employment (i.e. the number of available jobs) strongly increased during the post-war period, albeit in alternating periods. Never in its history have there been so many individuals in paid employment in Belgium as today. Between 1955 and 2012, employment increased from 3,498,000 to 4,479,034 jobs (FOD Economie: ADSEI, labor market indicators) (Figure 14.1). Overall, however, social spending remained relatively steady at a high level: between 2005 and 2009 it amounted to an average of 27 percent of GDP. For various reasons decreased economic dependency did indeed not imply a proportional decrease in the total social policy caseload: demographic aging led to more pensioners; feminization and changing family structures implied that more and more working-age individuals were entitled to benefits while in-work benefits increased significantly as they were seen as an important tool for enhancing labor market participation. All these factors explain why decreasing economic dependency did not translate into a decrease in overall social spending. They also explain the shift in social spending: spending on “old social risks” (Bonoli, 2005) decreased while spending for elder care, childcare, career breaks and active labor market increased (Cantillon, 2011; Cantillon and Vandenbroucke, 2014). Meanwhile, overall poverty rates and income inequality remained relatively stable. However, under the surface of distributional stasis, we observe a steady increase of child poverty and a dualization between work-rich and work-poor households. Based on SILC, the share of Belgian children living below the poverty threshold rose from 15 percent in 2006 to 18.5 percent in 232

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Total annual hours worked (in thousands) (left axis) Employment (in thousands of persons) (right axis) Annual hours worked (right axis) Labor force (15–64) (right axis) Figure 14.1 The labor force, the employed and number of hours worked, Belgium (1950–2012) Sources: Total Economy Database, The Conference Board and Groningen Growth and Development Centre, January 2008, http://www.conference-board.org/economics; Labor Force: Labor Force Survey, Labor Force (15–64).

2010 (Vandenbroucke and Vinck, 2013). Similarly, the at-risk-of-poverty rate among the unemployed increased from 31.5 percent in 2006 to 35.3 percent in 2012. Although the institutions of the Belgian welfare state were rather successful in increasing employment levels, in the development of capacitating services and in compensating for sluggish low wages they failed to prevent a creeping polarization between the haves and the have-nots (Vandenbroucke and Vinck, 2013). Divergent trends in the at-risk of poverty rates between the work-poor and work-rich households have also been found in Spain, Denmark, Finland and Sweden (Cantillon et al., 2014). In Table 14.1 we consider the evolution in the distribution of household incomes. To this end, we rely on time series drawn from socio-economic surveys of large population samples (ECHP in the 1990s and SILC in the 2000s). While these data only allow comparisons within the sub-periods of 1994–2000 on the one hand and 2004–2010 on the other, and despite the fact that account must be taken of potential sampling and measurement errors, these data indicate that there has most likely been no increase in either poverty or inequality in household incomes within the working-age population. On the contrary, the inequality measures and poverty indicators suggest that the situation has remained rather stable in the pre-crisis years. 233

Bea Cantillon et al. Table 14.1 Evolution of the at-risk-of-poverty rate (AROP) (pre- and post-transfer), absolute poverty reduction through social transfers, according to household work intensity (WI), plus the proportion of work-poor and work-rich households and indicators of average earnings and median income, Belgium (ECHP 1994–2000 and SILC 2004–2010)

Percentage point change Post-transfer AROP [20–59] (Total population) (Work-poor population WI < 0.5) (Work-rich population WI ≥ 0.5) Pre-transfer AROP [20–59] (Total population) (Work-poor population WI < 0.5) (Work-rich population WI ≥ 0.5) Absolute poverty reduction through social transfers [20–59] (Total population) (Work poor population WI=0.5) Shares based on hh work intensity [20–59] HH WI = 0 0 < HH WI < 1 HH WI = 1 Percentage change Median equivalent net income Median equivalent net income [16–64] Gini disposable equivalent income Gini disposable equivalent income [18–64] Gini gross earnings full time workers

1994–2000

2004–2007

2007–2010

Level 2010

−3.0*** −0.8*** −1.4

−0.1 4.7** 0.2

1.4 6.8*** −0.2

13% 49% 5%

−8.0*** −2.9 −4.9***

−1.2 −0.3 0.9

0.6 3.0 −0.5

25% 84% 12%

−5.1 −2.1 −3.5

−1.1 −5.0** 0.7

−0.8 −3.7 −0.3

12% 35% 7%

−1.3 −7.2 8.5

−0.5 −1.9 2.4

0.2 −1.9 1.6

12% 25% 64%

8 7

2 2

4 4

−3 na

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0.26 0.26

na

1

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19.950 21.280

Note: Household work intensity: number of months worked by working-age household members (excluding students) as a proportion of the total number of months that they could, in theory, have worked; ***, **,*: statistically significant using respectively 95, 90 and 85 percent confidence intervals. Sources: AROP: calculated by D. Frans based on ECHP (1995–2001), EU-SILC (2005–2008 and 2008–2011). Median incomes and Gini (total population): Eurostat, SILC (1995–2011). Gini gross earnings: calculated by D. Frans based on EU-SILC (2005–2008 and 2008–2011). Shares based on hh work intensity: calculated by V. Corluy based on LFS (1994–2010).

Although recent research has found indications of a growing gap in the remuneration of lowversus high-skilled labor in Belgium, the general development of wages would appear not to point at growing inequality (see among others Marx and Nolan, 2009; Horemans, Pintelon and Vandenbroucke, 2011). The Gini coefficient (an inequality measurement) of gross wages of individuals who have worked full-time for a whole year remained virtually unchanged. So despite a widespread perception that inequality and poverty have increased, the empirical sample data are indicative of a considerable degree of stability in the distribution of income among the population of working age, including at the lower end of the distribution (Cantillon, 2011). 234

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This observed stability is quite remarkable. However, while it can be interpreted in positive terms as a mark of policy success in the face of inegalitarian forces such as globalization, deindustrialization and individualization, it can also be framed in altogether more negative terms: in view of the relatively favorable circumstances in the pre-crisis years – which were characterized by general income growth, a substantial increase in employment, and high and further rising levels of social spending – stability may be seen as a standstill, as a mark of failure on the part of welfare-state institutions to continue to generate tangible social progress. Previous research has shown that, in general terms, the poverty standstill in the favorable years prior to the crisis is attributable to two factors (Cantillon, 2011; Cantillon and Vandenbroucke, 2014). First, employment growth was translated insufficiently into a reduction in the number of households out of work (Corluy and Vandenbroucke, 2014). Second, social protection for households who were unable to benefit fully from employment growth has become (even) less generous:Table 14.1 shows on the basis of a classic comparison of household income before and after social transfers that, particularly among work-poor households, absolute poverty reduction through social benefits declined.

Belgium’s targeting within universalism THE FRAMEWORK OF THE HEALTH INSURANCE SYSTEM

Belgium has a compulsory social health insurance system (HIS) for the entire population financed through income-related social contributions supplemented by general taxes. It is organized at the federal level with a central role played by the National Institute for Sickness and Disability Insurance (NISDI). The implementation is in the hands of different sickness funds. Sickness funds compete for affiliates on ideological grounds, proximity of offices and other services, but all offer the same cover. HIS covers a wide range of services, including primary and specialist care, hospitalization, dental care and most drugs. Examples of non-covered services for which patients thus pay the full price out-of-pocket (OOP) include non-essential drugs such as sleeping pills, antipyretics or vitamins, aesthetic surgical interventions, glasses, contact lenses or laser surgery to correct near- and farsightedness. Health services are provided by independent practitioners and non-profit private and public hospitals and paid for on a fee for service basis. Patients can choose and freely change their GPs with no limitations and they have direct access to specialists without referral. Only in a soft way, people are encouraged to choose a preferred GP and use this GP as a central entry point for treatment. Patients can indicate a GP to hold their General Medical File (GMD) (with medical social and administrative information). Consequently, for each consultation with the GP holding the GMD, co-insurance by the patient is reduced by 30 percent. Further, for the first visit to a specialist referred by that GP, co-insurance of the specialist consultation is reduced as well. Additionally, providers enjoy much freedom of treatment. As a kind of counterbalance to this liberal system, out-of-pocket payments are used as an instrument for patient accountability. As in most countries, there is a problem of increasing health care costs. From 2004 to 2012, per capita total health care expenditures in constant prices 2005 have increased from €2,769 to €3,203. The increase is slightly higher for public in comparison to private expenditures (the public share increases from 73.9% to 75.3%) and also higher than that of GDP. Over the longer run, the increases are even much more pronounced. Due to differences in the data collection method, data are not strictly comparable, but since 1980 per capita total health care expenditures (constant prices) have roughly increased with 170 percent leading to an increase in its share of per capita GDP from 6.3 to 10.9 percent (OECD, 2014) (Figure 14.2). Technological 235

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3,200 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0

2004

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Figure 14.2 Public and private per capita health care expenditures, in constant euros 2005 (2004–2012) Source: OECD (2013).

innovations and a greying population will further nourish the trend towards increasing expenditures. It is a huge challenge for public budgets to accommodate this. So, given our liberal system and the increasing expenditures, it was decided that health insurance will not cover the full price of the service. For most items there is a co-payment, which is to be paid by the patient. Reimbursements and co-payments are strongly regulated in the compulsory system; its sum is the “convention tariff.” Health care providers, however, are not obliged to abide by the convention tariff in all circumstances. If providers charge a fee in excess of the convention tariff, the excess is called a supplement, which also has to be paid by the patient. There is no systematic and detailed information on the total amount of all out-ofpocket (OOP) payments, but in comparison to other welfare states, it is sizeable. According to OECD only 75.3 percent of total expenditures on health are public, 20.4 percent are private households OOP and 4.2 percent are private insurance payments, consisting mainly of complementary coverage of inpatient co-payments and supplements. Belgium’s system of relatively high OOP payments may disrupt living standards for some individuals or families. This is evident for poor people with limited financial means; even without major health problems, they will be unable to access medical care in the face of high OOP. But due to the unpredictable nature of illness and its skewed distribution with very high expenses for a limited number of people, this could be the case for in fact all of us. To illustrate the skewness of payments: 37 percent of all health insurance expenditures go to the 5 percent of families with highest expenditures. To safeguard equity, various measures are introduced, specifically targeted at these vulnerable families. The measures are a compromise between social protection and individual responsibility. 236

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First, vulnerable families are protected as they are entitled to increased reimbursements (and thus reduced co-payments). Originally, this protection was restricted to patients with a specific social status (widows, orphans, pensioners and invalids) and provided the gross taxable income of their family did not exceed a yearly adapted limit. Over the years, additional groups were included and since July 2007, the reference to specific social circumstances has been dropped, and increased reimbursement is granted to all households below a certain income level, if applied for. The reduction depends on the type of service. For example, as of January 2014, co-payments for beneficiaries of increased reimbursement amount to about 5 percent (€1) for consultations with a GP and about 10 percent for visits of a GP (€2–2.9), and there is no co-payment for preventive dental examinations. Insured individuals not eligible for increased reimbursements face co-payments of about 20 percent for consultations with a GP (€4), about 35 percent for visits of a GP (€8–10.5), and pay €3.83 for preventive dental consultations. Second, there is legislation protecting beneficiaries of increased reimbursement against supplements. Physicians, for example, are not allowed to charge extras in a hospital such as for patients staying in a double or common room. Third, lump sum compensations exist, compensating some individuals with high expenditures (e.g. for palliative care, chronic illness, incontinence). Finally, the maximum billing system (MAB) constitutes a further protection mechanism. It sets a yearly ceiling on the total amount of co-payments of the household: if the household has co-payments above this ceiling, these are reimbursed. All households are eligible to the MAB, but the ceiling varies with the level of net taxable household income. This is a typical and well-functioning example of “targeting within universalism” (Skocpol, 1991). In the next paragraphs, we will first give a brief historical overview and then explain the current system in more details. THE ARCHITECTURE OF THE MAXIMUM BILLING SYSTEM (MAB)

The first ceilings on total co-payments were implemented in 1994 with the so-called social and fiscal exemptions. A sizeable increase in co-payment in 1993–1994 (a measure of cost containment) was the immediate motivation.5 The general idea was that the increased co-payments had to be counterbalanced with additional protection to prevent co-payments constituting an excessive share of income. Hence, a ceiling on co-payments was introduced, and the ceiling varied with the level of income. At the start, the design of the system was not optimal because of unavailability of data.The sickness funds, for example, did not know the income position of their members. That’s why, at the start, the fiscal administration determined the relevant co-payment ceiling at the moment of income taxation and reimbursed eventual excess payments – hence the name fiscal exemption. There was an exception, however: increased reimbursement status was seen as an indicator of low income. Therefore, for this group the lowest ceiling was applied and reimbursement was immediately organized through the sickness funds once the limit was reached. It was called the social exemption. Neither for the social nor for the fiscal exemption, there was complete protection, because not all co-payments were taken into account. Moreover, the protection was not at the household level, but at the level of the “mutualistic household.” A mutualistic household consists of a member paying contributions and all the member’s dependents. Data collection and exchange between different sickness funds and the fiscal administration were improved to address problems. Over time, protection improved by including more health care items. In addition, co-payment limits now relate to the more relevant unit of the sociological household (instead of the mutualistic household) with immediate reimbursement for everyone through the sickness funds. The 237

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current system is operational since 2002,6 and is referred to as maximum billing (MAB). It now consists of three parts: • •

•

Social MAB: applicable when the household is beneficiary of increased reimbursement with a household co-payment limit of €450. Income MAB: applicable to all other households with household co-payment limits varying from €450 for a net taxable household income up to €17,780.17 (figures for 2015) to €1,800 for an income above €46,042.71.7 The income limits and payment ceilings are irrespective of household size. Child MAB: applicable to all children below 19 years of age with an individual co-payment limit of €650.The child MAB acts as an extra protection mechanism for children, irrespective of family income.

Co-payments as % of income

Currently, the protection against co-payments is comprehensive: almost all co-payments are added in the maximum billing system with some minor exceptions.8 Moreover the ceilings have been kept constant since 2002 and the highest ceiling of €2,500 has been dropped.9 Income brackets have been adapted to inflation. As a result the maximum co-payments, as a percentage of households’ income, have been decreasing over time. A graphic representation is given in Figure 14.3. In 2002 the maximum share of co-payments in household income varied from 3.1 till 5.1 percent for an income of €35,557.10 if we disregard the share in the first income bracket where the ceiling on co-payments is €450 and thus can in principle reach infinity (for a zero income). In 2015, this is reduced to shares between 3.3 and 3.9 percent (again making abstraction of the first income bracket, where the share can still reach infinity). As a result of increasing comprehensiveness with unchanged ceilings, the expenditures of the maximum billing system have been increasing over the years, from €205 million in 2003 to €331 million in 2013.This is shown in the bars in Figure 14.4.The MAB as a share of total HIS expenditures remains limited to about 1.4 percent.

7 6.5 6 5.5 5 4.5 4 3.5 3 2.5 2 0

10,000

20,000 30,000 40,000 Household income (in euros) 2002

50,000

60,000

2015

Figure 14.3 Maximum share of co-payments as a function of income (2002 and 2015) Source: Author’s own calculations.

238

The Belgian welfare state system 9.0

350 300

8.0

%

200 7.0 150

Million euro

250

100

6.0

50 5.0

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

0

MAB expenditures (secondary axis) Co-payments before MAB as a % of total expenditures Co-payments after MAB as a % of total expenditures

Figure 14.4 Expenditures of the maximum billing and co-payments as a share of expenditure before and after maximum billing (2003–2013) Source: Author’s own calculations on the basis of HIS statistics.

EFFECTIVENESS OF THE MAXIMUM BILLING

The MAB ensures that families pay less in co-payments. This can easily be seen in Figure 14.4. For 2012 co-payments decrease from 7.4 percent of total expenditures (HIS expenditures plus co-payments) before MAB to 6.2 percent after MAB. This decrease of about 1.2 percent has been stable over the time period considered (2003–2012) even though the co-payment share before MAB has been decreasing itself. As said earlier, protection is not uniform, but focused on high spending households. To demonstrate the impact of the MAB, we focus in the figure on 95th percentile households. This final 5 percent of households (ranked according to HIS expenditures) are responsible for 37 percent of HIS expenditures. As expected the distribution is very skewed to the right. Co-payments before the MAB are already less concentrated, due to the structure of these copayments which are relatively smaller for the more expensive inpatient treatments: the final 5 percent of households pay 17 percent of co-payments. The correction of the MAB further reduces its share to 11 percent. Co-payments of these families amount to €1,457, of which on average €652 is reimbursed through the MAB. Until the 60th percentile, the average MAB reimbursement is less than €5. So the MAB is an effective instrument for protecting households against co-payments. At the same time, OOP payments are not limited to co-payments, but also consist of supplements. Information on supplements is only partially known by the HIS; information is relatively complete for inpatient supplements.

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As supplements are not incorporated in the MAB, its skewed distribution is not altered: the 5 percent most expensive households pay 26 percent of all supplements. The non-inclusion of supplements in the MAB counter rests again on the responsibility of the consumer. Supplements are to a large extent related to inpatient stays in a single room, and therefore are considered to be avoidable, without loss of quality (the treatment in a single room ought to be the same as in a common room). The issue is addressed through protective legislation. Private insurance can further alleviate the burden, for those willing to buy this insurance. Schokkaert et al. (2008) extensively investigated behavioral effects.They found no indication that consumption altered as a result of reaching the MAB ceiling. They observed some provider effects in that providers charged co-payments more often if they were confident that their patients would reach the MAB ceiling in the course of the year. Given methodological difficulties to detect behavioral changes, these conclusions are not conclusive. Nevertheless, they seem plausible, given the fact that many households only reach the ceiling at the end of the year and are unaware of their cumulative co-payments.

The current state and the future of the Belgian welfare state system Belgium has experienced momentous change in recent decades, driven primarily by three concurrent evolutions: the emancipation of women and individualization; the rise of the service and knowledge economy; and globalization and Europeanization. More recently, migration and population aging (and the ensuing substitution of working-age cash benefits and health care) have emerged as two further impeding factors to achieving social progress through the institutions of the welfare state. There are indeed reasons to believe that it has become and will remain difficult for modern welfare states to successfully pursue their core objectives of growth, full employment and social inclusion. Against this background in Belgium a large consensus has grown in recent years regarding the need for a thorough rethink of the post-war policy paradigm towards social investment and employmentcentered welfare reform and prevention (“prepare”) rather than “repair” (Hemerijck, 2013). Clearly, governments cannot be too ambitious in deploying investment strategies for the development of human capital, early childhood development, training, education and lifelong learning. However, a one-sided implementation of social investment entails the danger of an underestimation of the workings of labor markets, the impact of technological changes on the job opportunities of low-skilled workers (Brynjolfsson and McAfee, 2014) and the strong gravitational pull of social class, and thus the overstatement of the potential of activation, enabling and developmental strategies, and a depreciation of the question of redistribution, of social protection and of care for the most vulnerable. Thus, without a renewed focus on social redistribution and without effective guarantees regarding basic social rights for those in and those out of work, and without a reappraisal of activities that are considered as economically non-productive, it will become increasingly hard to achieve social progress in a future that promises to be bleaker than the past. In Belgium, the most important policy objectives for doing so include in the first place the reduction of the number of work-poor households. Successful activation, lower taxes on wages below the median and part-time work can arguably be considered as good practices of how a better distribution of more jobs can be attained. Minimum incomes in general and child benefit packages should become more adequate: to this end more efficient policy designs, genuine activation measures as well as adequate minimum wages should be put in place. 240

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More generally, social spending should become more redistributive: the maximum billing system in health care discussed in this chapter exemplifies that a greater “efficiency” in terms of poverty reduction can be achieved by a proper design without compromising too much the legitimacy of the social insurance system. Finally, while in Belgium the living standard in old age is on average lower than the living standard of families with children, the intergenerational distribution of the aging cost should firmly remain on the agenda of the upcoming and necessary pension reform. Finally, from the late 1970s onwards, in Belgium a whole range of local social innovative policies and practices emerged in the institutional margins of the welfare state.Their importance and value should not be underestimated. Responses to the persistence of poverty, the concentration of disadvantage in multicultural urban areas, and the individualization of social exclusion by locally embedded civil society, all suggest that place-based institutions and social enterprises should be considered as seeds for progress in a future that looks bleaker than the past.

Notes 1 “And yet it moves” is a phrase attributed to the Italian mathematician, physicist and philosopher Galileo Galilei (1564–1642) during the Galileo affair in 1633, after he was forced to recant his claims that the Earth moves around the Sun rather than the converse (Wikipedia). 2 For example by introducing a social work bonus in 1999, i.e. a reduction in the employee’s social security contributions aimed at employees below a certain maximum wage level. 3 It should be noted that in the booming years in the 2000s before the crisis, cost containment was less of a priority which allowed for some significant improvements of the generosity of social benefits (Kazepov, 2010;Van der Veen, 2009;Van Mechelen et al., 2010; Weishaupt, 2011). 4 The share of private health insurance as percentage of total health expenditures has actually declined over the same time period from 4.9 percent (2003) to 4.2 percent (2012) (OECD, 2014). 5 In 1994 co-payments for GP and specialist consultations doubled. 6 To be precise, it is only since January 2005 that the fiscal MAB no longer exists and all income levels are reimbursed immediately through the sickness funds. For more details see Schokkaert et al. (2008). 7 The other ceilings are €650 (for income between €17,780.19 and €27,333.69), €1,000 (for income between €27,333.70 and €36,887.24) and €1,400 (for income between €36,887.25 and €46,042.70). 8 Co-payments of non-essential drugs (categories Cs and Cx) or room costs for psychiatric hospitalization in excess of 1 year are still not taken into account. 9 Since 2013 the household ceilings and the child ceiling are reduced by €100 if an individual household or the child paid at least €450 co-payments during the two previous years or is recognized as chronically ill. This additional measure was introduced to take into account the persistency of large OOP payments over time.

References Bonoli, G. (2005), The Politics of New Social Policies: Providing Coverage Against New Social Risks in Mature Welfare States, Policy and Politics,Vol. 33, No. 3, pp. 431–449. Brynjolfsson, E. and McAfee, A. (2014), The Second Machine Age: Work, Progress, and Prosperity in the Time of Brilliant Technologies, W. W. Norton: New York. Cantillon, B. (2011), The Paradox of the Social Investment State: Growth, Employment and Poverty in the Lisbon Era, Journal of European Social Policy,Vol. 21, No. 5, pp. 432–449. Cantillon, B. and De Maesschalck,V. (2007), Sociale Zekerheid, Transferten en Federalisme in België, Belgisch Tijdschrift voor Sociale Zekerheid,Vol. 49, No. 2, pp. 379–408. Cantillon, B.;Van Mechelen, N.; Frans, D., and Schuerman, N. (2015), Het Glazen Plafond van de Actieve Welvaartsstaat: Twee Decennia Ongelijkheid, Armoede en Beleid in België, in W. Lahaye, I. Pannecoucke, J. Vranken, and R. V. Rossem (eds.), Armoede in België. Jaarboek 2015, Academia Press: Gent, Belgium. 241

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Cantillon, B.;Van Mechelen, N.; Pintelon, O., and Van den Heede, A. (2014), Social Redistribution, Poverty and the Adequacy of Social Protection, in B. Cantillon and F.Vandenbroucke (eds.), Reconciling Work and Poverty Reduction: How Successful Are European Welfare States? Oxford University Press: Oxford. Cantillon, B. and Vandenbroucke, F. (2014), Reconciling Work and Poverty Reduction: How Successful are European Welfare States? Oxford University Press: Oxford. Corluy, V. and Vandenbroucke, F. (2014), Individual Employment, Household Employment and Risk of Poverty in the EU: A Decomposition Analysis, in B. Cantillon and F. Vandenbroucke (eds.), Reconciling Work and Poverty Reduction: How Successful Are European Welfare States? Oxford University Press: Oxford. De Rick, K.; Drieghe, L.; Jacobs, L., and De Cuyper, P. (2014), Het POP: Een Effectief Instrument in Het Arbeidsmarktbeleid? https://lirias.kuleuven.be. Esping-Andersen, G. (1996), Welfare States Without Work: The Impasse of Labour Shedding and Familialism in Continental European Social Policy, in G. Esping-Andersen (ed.), Welfare States in Transition: National Adaptation in Global Economy, Sage: London. ——— (2002), Why We Need a New Welfare State, Oxford University Press: Oxford. ——— (2008), Childhood Investments and Skill Formation, International Tax and Public Finance, Vol.  15, No. 1, pp. 19–44. FOD SZ (2011), De Sociale Zekerheid in Zijn Context: 30 Jaar Statistieken, FOD Sociale Zekerheid: Brussels. Fourastié, J. (1979), Les Trente Glorieuses: Ou la Révolution Invisible de 1946 à 1975, Fayyad: Paris. Ghysels, J. and Van Lancker,W. (2011),The Unequal Benefits of Activation: An Analysis of the Social Distribution of Family Policy Among Families With Young Children, Journal of European Social Policy,Vol.  21, No. 5, pp. 472–485. Hemerijck, A. (2013), Changing Welfare States, Oxford University Press: Oxford. Hemerijck, A. and Marx, I. (2010), Continental Welfare at a Crossroads: The Choice Between Activation and Minimum Income Protection in Belgium and the Netherlands, in B. Palier (ed.), A Long Goodbye to Bismarck? The Politics of Welfare Reforms in Continental Europe, Amsterdam University Press: Amsterdam. Horemans, J.; Pintelon, O., and Vandenbroucke, P. (2011), Inkomens en Inkomensverdeling op Basis van Belgische Enquêtegegevens: 1985–2007, UA/Centrum voor Sociaal Beleid Herman Deleeck: Antwerp, Belgium. Iversen, T. and Wren, A. (1998), Equality, Employment, and Budgetary Restraint: The Trilemma of the Service Economy, World Politics,Vol. 50, No. 4, pp. 507–546. Kazepov,Y. (2010), Rescaling Social Policies:Towards Multilevel Governance in Europe, Ashgate: Farnham. Kim, T. D. and Pelleriaux, K. (2010), Equity in Education Thematic Review, Country Analytical Report, University of Antwerp, Belgium. Marx, I. and Nolan, B. (2009), Poverty and Social Exclusion, in W. Salverda, B. Nolan, and T. Smeeding (eds.), Oxford Handbook of Economic Inequality, Oxford University Press: Oxford. Meeusen, L. and Nys, A. (2014), Annex: The Evolution of Public Social Spending 1985–2009, For Better, for Worse, for Richer, for Poorer: Labour Market Participation, Social Redistribution and Income Poverty in the EU, Oxford University Press: Oxford. OECD (2006), Starting Strong II, OECD: Paris. ——— (2013), OECD Health Data, http:.//www.oecd.org. ——— (2014), OECD Health Data, http:.//www.oecd.org. Palier, B. (2010), The Long Conservative Corporatist Road to Welfare Reforms, Amsterdam University Press: Amsterdam. Schokkaert, E.; Guillaume, J.; Lecluyse, A.; Avalosse, H.; Cornelis, K.; De Graeve, D., and Van de Voorde, C. (2008), Evaluatie van de Effecten van de Maximumfactuur op de Consumptie en Financiële Toegankelijkheid van de Gezondheidszorg, KCE Reports, No. 80. Skocpol, T. (1991), Targeting Within Universalism: Politically Viable Policies to Combat Poverty in the United States, in C. Jencks and P. E. Peterson (eds.), The Urban Underclass, The Brookings Institution: Washington, DC. Taylor-Gooby, P. (ed.) (2004), New Risks, New Welfare:The Transformation of the European Welfare State, Oxford University Press: Oxford. Van der Veen, R. (2009), The Transformation of the Welfare State: What Is Left of Public Responsibility, in W. Schinkel (ed.), Globalization and the State, Palgrave Macmillan: Basingstoke. 242

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Van Kersbergen, K. and Hemerijck, A. (2004), Christian Democracy, Social Democracy and the Continental “Welfare Without Work” Syndrome, Social Policy Review,Vol. 16, pp. 167–186. Van Mechelen, N.; Marx, I.; Marchal, S.; Goedemé, T., and Cantillon, B. (2010), The Evolution of Social Assistance and Minimum Wages in 25 European Countries, 2001–2009, Herman Deleeck Centre for Social Policy: Antwerp: Belgium. Vandenbroucke, F. and Vinck, J. (2013), Child Poverty Risks in Belgium, Wallonia, Flanders: Accounting for a Worrying Performance, in P. Maystadt, E. Cantillon, L. Denayer, P. Pestieau, B.Van der Linden, and M. Cattelain (eds.), Le Modèle Social Belge: Quel Avenir? Presses Interuniversitaires de Charleroi: Charleroi, Belgium. Weishaupt, J. T. (2011), From the Manpower Revolution to the Activation Paradigm Explaining Institutional Continuity and Change in an Integrating Europe, Amsterdam University Press: Amsterdam.

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15 The German welfare state system With special reference to the old-age pension system Karl Hinrichs

Germany has been the pioneer nation in establishing social insurances as a variant of modern social policy. Otto von Bismarck is usually credited with this achievement because legislation on three social insurance schemes occurred between 1883 and 1889 when he was chancellor of the German empire. These schemes protected (industrial) workers against the risks of sickness, work accidents and disability/old age.Very soon, the institutional innovations in Germany became a source of transnational learning. They inspired policy makers to develop alternative solutions to mounting social problems mainly caused by industrialization and the broadening of wage labor (e.g. in Denmark and the UK). A number of European countries (first Austria and Belgium), however, largely followed the German exemplar and formed a cluster of Bismarckian welfare states (Palier, 2010). Due to the early decision in favor of the social insurance solution and the fast growth of the schemes, alternatives (like universal, tax‑funded benefits) vanished from the political agenda or did not emerge at all so that social policy development in Germany occurred as a path‑dependent process. In 1927, unemployment insurance was added as a further branch of social insurance, and after a long political struggle, the implementation of long‑term care (LTC) insurance (1995/1996) as an independent scheme was most faithful to the path entered in the 1880s (Götting et al., 1994).While retaining their institutional structure, since their inception all social insurance schemes expanded incrementally in three dimensions: mandatory coverage was extended to further categories of the labor force; initially exiguous benefits became much more generous; and entitlements were enlarged (e.g. pension benefits for survivors or active labor market policies added) or diversified (e.g. opening up more than one pathway into retirement). Thus, despite intensified efforts to transform welfare state institutions since about the mid‑1990s, Germany can still be characterized as the “social insurance state” par excellence. In 2013, still 44 percent of the general government’s outlays ran through the various social insurance schemes, and they disbursed 62 percent of total social expenditure (according to national calculations; BMAS, 2014). Social insurance spending amounted to almost one-fifth of GDP which signifies the substantial impact of these social security institutions on the economy and people’s living conditions. The predominance of the institutionally segmented social insurance system within the overall edifice of social protection, a feature of the still effective Bismarck legacy, made Germany the prototype of a comparatively large and, at the same time, 244

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transfer‑heavy welfare state.This welfare state variant was said to be most strongly challenged by demographic aging and features of post-industrialism. The strong reliance on earnings‑related contributions – the combined rate paid by employers and employees standing at 39.55 percent in 2015 – was widely regarded as the major weakness of the arrangement, fostering a “welfare without work” syndrome (Esping‑Andersen, 1996; Scharpf, 2002). The allegation of not being employment‑friendly extended to other Continental countries belonging to the family of Bismarckian welfare states. Moreover, welfare state arrangements in these countries were assumed to be “frozen landscapes” (Esping‑Andersen, 1996) and the most “immovable objects” when, in a climate of austerity, reforms were at stake (Pierson, 2001). The recent policy development in Germany and other social insurance states has largely disproved those assumptions. In the next section I will briefly describe the main characteristics of the German welfare state, focusing on the social insurance schemes (however, leaving out the small and most undisputed accident insurance), needs-tested benefits and family policy.Thereafter, I will examine the public pension scheme, the core piece of Germany’s social protection arrangement, specifically the reforms since the 1990s aiming at financial sustainability that have put old-age security policy on a different track. The next section attempts to depict some development trends and problems the German welfare state arrangement will face.

Major characteristics of the German welfare state system Right from the start, the system of social security in Germany centered on wage laborers. It developed along the concept of a “standard employment relationship.” As a norm and the (once) predominant reality, it implies continuity and stability of employment with not more than short interruptions of gainful work. This is supposed to be dependent work, bound to directives and performed as a full‑time job based on an unlimited contract from the end of education until retirement at a certain age.1 Resting upon this pattern of employment, social insurance schemes provide wage replacement when typical risks of wage labor occur and employees are temporarily unable or are no longer expected to earn a market income. The earnings‑related benefits are also meant to reduce the dependence on regularly lower subsidiary assistance benefits which are subject to a means test. As a societal arrangement of production and reproduction the “standard employment relationship” was clearly gender biased. It was assumed that a full‑time job (even at the lowest wage rate) delivers a “family wage” which is an income sufficient to maintain the needs of a nuclear family. Social insurance schemes stabilized the emerging male breadwinner family because own and derived entitlements were usually high enough to also cover the needs of dependents.Thus, not much attention had to be paid to the social security of predominantly female workers in atypical or marginal employment, who provided merely a temporary or supplementary income. In this way, the female homemaker family was constituted as the opposite side of the coin, which largely rendered unnecessary state provisions for child and elder care and thus impeded the continuous integration of women in the labor market. Instead, cash transfers (child and housing allowances, tax advantages) met the income needs of family households during certain phases of the life course.

Social insurance: four analytic dimensions Social insurance schemes are financed out of proportional, earnings‑related contributions, unrelated to individual risk. Until the early 2000s they were equally divided between employers and employees. Contributions are levied up to certain earnings ceilings2 and above that no 245

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entitlements to cash benefits are earned. Tax-financed subsidies from the federal government have always been a funding component in the pension scheme, and after 2003 this is also true for health insurance. Recurrently, the federal government had to cover deficits of the unemployment insurance scheme. All schemes operate on a pay‑as‑you‑go basis with small contingency reserves. In general, access to benefits is dependent upon prior contributions paid out of actual earnings,3 and benefits are granted without a means test. Most members of the schemes are compulsorily insured. The sickness funds and the public pension scheme may also be joined voluntarily (e.g. by self‑employed), and employees with earnings above a certain ceiling may either remain voluntary members of the statutory sickness funds or opt out and seek private insurance coverage. The LTC insurance started as an almost universal scheme, requiring membership even for those who had voluntarily taken out private health care coverage.This scheme and also the sickness funds provide in‑kind benefits to dependent family members with no income or earnings below a certain threshold. They are exempted from contributions as their eligibility rests upon the coverage of the principal person insured. The pension scheme also offers “derived” benefits for survivors of a deceased worker/pensioner. Regarding benefit structure, cash benefits prevail (57 percent of the social insurance schemes’ expenditure in 2013; BMAS, 2014: 19), and in all schemes they are related to former earnings. The equivalence principle (individual equity) is most strictly applied in the pension scheme because the length of covered employment counts as well. The level of earnings‑related benefits is meant to ensure status maintenance, although the replacement ratio varies across the schemes.4 All four social insurance branches also or solely grant in‑kind benefits – rehabilitation (pension scheme), training (unemployment insurance), medical care (which makes up 95% of the sickness funds’ expenditure) and long‑term care (100%). Here we find a dualism of principles. Contributions are levied according to earnings capacity, whereas in‑kind benefits are awarded depending on ascertained (medical) need or appropriateness to facilitate the return to employment (rehabilitation and active labor market policies). Thus, interpersonal redistribution within the risk pool of insured is more pronounced than in the realm of cash benefits. All social insurance schemes are para‑public entities with separate budgets. Right from their inception, corporatist self‑administration has been a central feature and a correlative of contribution financing. However, self‑administration as such has lost much of its relevance (except for the health care scheme) because ever more detailed legislation has hollowed out the scope for autonomous decision making by the respective (corporatist) bodies and largely made self‑administration a symbolic feature, but it still offers both social partners a legitimate right to put forward their point of view in public and to be heard in legislative procedures.

Present specificities of the social insurance schemes The public pension scheme (Gesetzliche Rentenversicherung) accounts for the single largest item of welfare spending (Table 15.1). It covers about 81 percent of the total labor force. Moreover, there are special schemes for civil servants, farmers, artists and the liberal professions. However, 70–80 percent of all self‑employed are not obligatorily covered. The public pension scheme – only dealt with in this contribution – employs a point system to calculate the individual pension. An annual salary exactly at the level of average earnings of all insured (about €34,900 in 2014) yield one earnings point, a lower remuneration less than one earnings point, and in a given year a maximum of 2.05 points may be attained. At the end of working life, the earnings points acquired during all covered years are added up and multiplied with the earnings point value which stood at €26.81 in 2014. Thus, the “standard pensioner” who had earned the 246

The German welfare state system Table 15.1 Expenditure on selected items of social protection as percentage of GDP

Social insurance Schemes: • pensions • health care • long-term care • unemployment Needs-tested benefits Family-/childrelated benefits Other Total

2000

2013

10.6 6.5 0.8 2.4

9.6 7.0 0.9 1.1

2.0

2.6

2.6 4.8 29.7

2.8 5.7 29.7

Source: BMAS (2014: 12).

average wage for 45 years (= 45 earnings points) received a monthly gross pension of €1,287 from which health and long‑term contributions are deducted. If not claiming the first pension exactly at normal retirement age (2014: 65 years and 3 months) the individual earnings points are corrected – either reduced (in case of early retirement) or increased (when retirement is delayed). The earnings points value – relevant for both newly awarded pensions and pensions in payment – is annually adjusted according to a formula within which the wage change of the preceding year plays the most important role. Statutory health insurance covers almost 90 percent of the population; the remaining 10 percent has taken out private insurance (mostly civil servants, high-wage earners and self‑employed). Members of the statutory health care scheme may choose from a little more than 120 sickness funds which offer almost similar benefits. In the mid‑1990s there were still more than 1,200 independent sickness funds.Their number declined due to mergers as they had become exposed to more competitive pressure in order to curb mainly supply‑side driven spending hikes. The idea was that sickness funds should compete for members on the basis of efficiency and service quality, particularly when given more latitude to negotiate with service providers. An important element for strengthening competition within the health care system, starting already in 1995, was the introduction of a central “health fund” which since 2009 collects all contributions at a uniform rate fixed by the government. Additionally, the federal government contributes to the health fund, effectuating a lower contribution rate than would have to be raised otherwise.5 Transfers from the health fund to the individual sickness funds are apportioned according to the risk profile (age, sex and morbidity) of their membership. In case these revenues do fully not meet their expenses, sickness funds have to raise a supplementary contribution and, apparently, a low rate the funds have to ask only from the insured is a strong competitive edge. The legislation of long‑term care insurance (LTC) in 1994 was the last expansionary reform within the social insurance approach, although this institutional innovation to a large extent replaced previous spending on means‑tested care benefits. In view of a social risk becoming ever more virulent in an aging society, the proponents within the Christian Democratic and the Social Democratic party almost unanimously regarded the LTC scheme as the completion of the social insurance state. While a compromise on the contours of the benefit side (graded according to three need classes with no full‑cost coverage and, thus, different from health care 247

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benefits) emerged quite early, legislation was delayed for many years by the struggle over organizational form and, hence, how to finance such fundamental reform. Ultimately, the two large parties compromised upon a solution that was most faithful to the traditional social insurance path, namely, a separate branch under the roof of the sickness funds (Götting et al., 1994; Hinrichs and Warfelmann, 2011). Since 2006, the LTC scheme offers three main types of benefits, all graded according to the amount of care needed and fixed by law: there is a cash allowance for informal caretakers (mostly relatives) and, if below retirement age, contributions on their behalf are paid to the pension scheme. Furthermore, professional outpatient care services are paid for, and almost 30 percent of the 2.5 million beneficiaries receive inpatient care in nursing homes. Charges for room and board in nursing homes are not included. These expenses plus co‑payments for uncovered care costs6 increasingly exceed frail persons’ resources and make them dependent on social assistance, particularly because newly awarded pension benefits are lower for every successive birth cohort. The expenses of the unemployment insurance scheme and, hence, the contribution rate clearly vary with the level of unemployment (Tables 15.1 and 15.2). Almost immediately after unemployment figures started to soar in 1974, a series of incremental changes (moderately) increased the pressure on unemployed people to accept job offers, “nibbled” on the eligibility criteria for claiming unemployment benefits and impaired the entitlements in various way over and above small reductions of the replacement rate (see Clasen, 2005: 54–76). A major reform of active and passive labor market policies came about between 2003 and 2005 when the “Hartz laws” were implemented.7 They included changes in the governance structure of the Federal Labor Agency and measures to improve the services provided to its clients, new instruments of labor market policy, stricter “activation” of the unemployed, and a curtailment of insurance benefit eligibility for older unemployed (from a maximum period of 32 to 18 months, later re‑extended to 24). Most controversial, however, was the abolition of the awkwardly constructed unemployment assistance scheme (Arbeitslosenhilfe) that was tax‑financed (federal budget) and means‑tested, but at the same time, earnings‑related. This benefit had meant to (indefinitely) ensure status preservation at a lower level of provision than did unemployment insurance benefits. A new benefit type (Arbeitslosengeld II; acronym: ALG II ) is in place since January 2005. The change implied lower benefits for many long‑term unemployed because ALG II is flat‑rate and contingent upon a comprehensive means‑test. Eligible are people of employable age who are “able to work” (defined as at least 3 hours per day) and obliged to seek employment. For their dependents “not Table 15.2 Combined contribution rate (employer + employee) to social insurance schemes

1960 1970 1980 1990 1998 2000 2005 2010 2015

Total

Pension

Health

LTC

Unemployment

24.4% 26.5% 32.4% 35.8% 42.1% 41.1% 41.4% 39.6% 38.7%

14.0 17.0 18.0 18.7 20.3 19.3 19.5 19.9 18.7

 8.4  8.2 11.4 12.8 13.6 13.6 13.7 14.9 14.6b

– – – – 1.7 1.7 1.7a 1,95 2.35

2.0 1.3 3.0 4.3 6.5 6.5 6.5 2.8 3.0

Notes: a since 2005 plus 0.25 percent from insured childless persons aged 23 and older; b plus 0.9 percent supplementary contribution (average) from insured persons. Source: Deutsche Rentenversicherung Bund (2014: 262).

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able to work” (mostly children) there are supplements. ALG II is not merely a basic security scheme for the registered unemployed with no or too low insurance entitlements. Rather, it is designed to serve all needy people of working age. As with social assistance before, ALG II may be paid as an in‑work benefit if income from employment is too low to meet the needs of the household. Despite the favorable labor market development after 2005, the number of recipients of ALG II has not declined much – mainly because the job centers are not particularly successful in (re)integrating long-term unemployed with low skills and further handicaps into stable jobs with decent pay. There were 6.7 million beneficiaries (including family members) in 2005 and 6.1 million in 2013. Moreover, since its inception in 2003, the special social assistance scheme for older people (beyond retirement age) and those with permanent disabilities (aged 18 and older) has gained in importance: the number of recipients rose from 440,000 in 2003 to 960,000 in 2013. These developments are the major reason for the increased percentage of GDP spent on needs‑tested benefits (Table 15.1). For long, the male breadwinner family has acted as the point of reference for family policy. The family was perceived as the primary provider of social services and, thus, “de‑familialisation policies” (Esping‑Andersen, 1999) were comparatively underdeveloped. Instead, family policy has been very transfer‑biased with child allowances quite generous by international standards (2015: €184 per child/month) and guided by the notion that one parent should stay at home until the youngest child’s third birthday. Therefore, parents may take a parental leave with job guarantee for up to 3 years. Since the mid‑2000s, however, the focus is on expanding childcare services for children below 3 years and after morning school and the attempt to shorten the interruption of employment. The corresponding changes mark the turn towards a “sustainable family policy” aiming at a higher fertility rate, improved chances for children from disadvantaged families, gender equality and the reconciliation of employment and parenthood. To that end the parental allowance, mildly income‑tested and paid for two years (€300 per month) was substituted with an earnings-related benefit in 2007. It is granted for 14 months (2 are reserved for the second parent) and replaces 67 percent of former net earnings (minimum €300; maximum €1,800). Moreover, as of August 2013 parents are entitled to demand external childcare after the child’s first birthday. The new emphasis on family policy is not yet fully discernible in spending figures (Table 15.1), but one has to bear in mind that the number of children below age 18 has decreased from 15.2 million to 13 million between 2000 and 2013. Finally, a look at the development of the combined contribution rate to the social insurance schemes shows a steady increase after 1960 and an extraordinary hike after unification (Table 15.2). Between 1990 and 1998, more than one-third of jobs were lost in East Germany. The advancing de‑industrialization process in West Germany put additional strain on both unemployment insurance and, due to massive inflows into early retirement in both parts of the country, also on the public pension scheme. The result of the “welfare without work” syndrome (Esping‑Andersen, 1996) was a peak level of the combined contribution rate of 42.1 percent in 1998, and it was during the second half of the 1990s when the political discourse shifted from social insurance as an effective problem‑solving technology to a perception of social insurance as a problem in itself. At that time globalization spread as a term in the political debate and was immediately related to high non‑wage labor costs as a threat to international competitiveness and job growth. Similarly, causal beliefs regarding the unemployment problem moved further away from macroeconomic constellations as a prime reason. Instead, too little labor market – due to excessive state intervention and the effects of industry‑wide collective bargaining – was identified as the root cause (Bleses and Seeleib‑Kaiser, 2004: 110–113, 121–123). Finally, demographic projections had hardly changed but were perceived as more dramatic than before, and 249

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generational equity, hitherto absent in the German discourse, became an issue in the struggle over further pension reforms which were supposed to limit the burden on younger and future generations. Altogether, what happened after about 1995 was the “social construction of an imperative” to reform (Cox, 2001) that paved the way for an ideational change. It materialized in substantial structural changes, starting around the year 2000 and, still unfinished, means a transformation of certain policy areas within new paradigms. The domain of pensions became the prime target of political efforts aiming at a combined contribution rate below the 40 percent threshold.

Special focus: reforms for a sustainable old-age pension system Two expansionary reforms (1957 and 1972) during the Golden Age had made Germany’s public pension scheme a quite generous one – also by international standards. Old‑age poverty had become a marginal problem, and several smaller retrenchments after the end of full employment (1974/1975) had not put into question the scheme’s two main objectives: ensuring status maintenance after a complete employment career and participation of pensioners in the growth of wages. The pension reform legislation of 1989 (becoming effective in 1992) was intended to retain these goals. It was a comparatively early response to imminent population aging and a highlight of consensual pension politics including the social partners and the major political parties (for details see Hinrichs, 2005). As a change of instruments, it formally introduced net wage indexing of new and current pensions. After 1992 a net replacement level of 70 percent for the “standard pensioner” (one who had worked for 45 years and always earned an average wage) was ensured. Moreover, in the long run workers taking out a first pension before reaching the normal retirement age of 65 would have to face permanent deductions. Federal subsidies to the public pension scheme were increased and expected to durably amount to 19 percent of the scheme’s spending.The cumulative effect of the various reform elements was expected to facilitate a contribution rate of 26.9 percent instead of 36.4 percent in 2030 (Sozialbeirat, 1998: 242). Among all relevant political actors the assessment prevailed that no substantial readjustments had to be considered before the year 2010. This expectation proved wrong after the discourse on social policy had altered (see earlier), and in pension policy the established consensus politics got broken for some time. The changes legislated by the late Christian Democratic–Liberal government in 1996 and 1997 were most controversial. In view of a steep rise of elder unemployed prematurely claiming an old‑age pension (at age 60), the phasing‑out of early retirement options without permanent deductions was accelerated in 1996. Moreover, various entitlements, not based on individual contributions out of earnings, were further reduced and thus strengthened the link between contributions and benefits. These retrenchments were a prelude for a more substantial reform legislated one year later and, once again, bitterly opposed by the Social Democrats who were closing ranks with the labor unions. In particular, they resisted impairments for disability pensioners and the inclusion of a “life expectancy factor” in the benefit formula (that would have led to a gradually declining replacement rate). After coming into office, the Red‑Green government suspended both controversial elements and passed a more moderate reform of disability pensions in 2000 instead. While the Social Democrats had fiercely opposed the pension reforms of 1996 and 1997, after taking office in autumn 1998, the Minister of Labor and Social Affairs came forward with a proposal for a structural reform in June 1999. Afterwards almost all elements were substantially modified so as to overcome veto points and opposition. Finally, a tacit consensus reemerged, and the reform was legislated in early 2001. In fact, the Red‑Green government executed a paradigmatic change when it departed from the supposedly “exhausted” social insurance approach (Bönker, 2005) in 2001. Two innovations included in the reform package are most important 250

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(Hinrichs, 2005).8 First, the reference point shifted from the benefit to the revenue side: the standard replacement ratio of 70 percent (net), established in 1992, was replaced with a fixed contribution rate that is supposed not to exceed 20 percent until 2020 and 22 percent until 2030. In order to keep to these targets, “brake mechanisms” were included in the benefit formula. The expected decline of the standard replacement ratio meant a clear departure from the dogma of status maintenance (after a complete full‑time career) to be attained by public pensions alone. Second, the core of the 2001 reform was the institutionalization of the so-called Riester-Rente. The benefits from this personal pension scheme are meant to compensate for the declining replacement rate of the public scheme and, thus, to ensure status maintenance as before. Such an extension to retirement income policy has irrevocably put the German pension system on a multi‑pillar track again, since 1957 having been tantamount to public pension policy and the one‑pillar approach. The voluntary take‑up of certified savings products for a Riester pension is encouraged by direct state subsidies or tax advantages (see Hinrichs, 2011a). The scheme was incepted in 2002, and the savings amounts as well as the subsidies were gradually increased. They attained their scheduled maximum in 2008. Since then, savings of 4 percent of gross earnings (up to €2,100 per year) in certified pension plans enjoy preferential treatment. An employee taking out such a savings contract receives a “basic subsidy” of €154. Additionally, there is a “child subsidy” of €300 (€185 for children born before 2008). It means that the pension saver has not to raise the full 4 percent out of net income.9 These provisions are particularly beneficial for low-paid workers with (several) children, whereas high‑wage earners may gain from a tax exemption.10 An alternative to the Riester pension, which can also be utilized in addition, is to convert parts of the salary (up to 4 percent right from the start in 2002) into savings to an occupational pension plan, either a single‑employer plan or one set up by industry‑wide collective agreement. All employees are entitled to demand such earnings conversion from their employer. The advantage is that earnings liable to income tax and social insurance contributions are reduced by the amount diverted for pension savings. The maximum amount that can be converted is 4 percent of the income ceiling for social insurance contributions, standing at €72,600 in 2015. In addition to this maximum amount of €2,904 it is possible to put in a further €1,800 into those plans. This additional amount is tax‑exempt but liable to social insurance contributions.The employer may match employees’ payments into an occupational pension plan.11 The “earnings conversion” variant is quite different from traditional occupational pension plans which were first of all an instrument of firms’ human resource policies in order to recruit, motivate and tie personnel and, thus, to supplement (sufficient) first‑pillar pensions. Regularly, those were “defined-benefit” schemes and only the employer paid the costs for the private pension, whereas the new plans are of the “defined contribution” (DC) type.Therefore, it was stipulated that payments made by the employee are immediately vested, and also portability of accumulated assets was eased. The new structure of the old‑age security system was consolidated in 2004. Calculations made prior to the 2001 reform had proven overly optimistic, and so as not to miss the contribution targets, the benefit formula was changed again. Following the recommendations of a reform commission, the inclusion of a so-called sustainability factor that takes into account the changing ratio of pensioners and insured will lead to a further decline of the replacement rate when the adjustment of the value of one earnings point, relevant for both newly pensions and benefits in payment, lags behind the growth of average covered earnings (Schmähl, 2007). The gross replacement ratio for the standard pensioner is going to decline from presently 48 to 40 percent in 2030 (Kommission, 2003: 107), that is by one-sixth (if she does not earn additional pension credits by working beyond age 65). When furthermore taking into account the effects of the change in pension taxation,12 the net standard replacement ratio is going to drop from about 251

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69 percent at the beginning of the 2000s to about 52 percent in 2030, or about one-quarter (Hain et al., 2004: 344–345). In order to ensure adherence to the contribution rate targets, the reform commission further proposed a higher standard retirement age (Kommission, 2003). The Red‑Green government abstained from including this most controversial and unpopular issue in the 2004 legislation, but closed the last loopholes for early retirement at age 60 (except for persons with a serious handicap, no public pension can be drawn before reaching age 63) and completely abolished credits for periods of schooling after age 17. Hence, it was the “Grand Coalition” government (Christian Democrats and Social Democrats) that decided in 2007 to lift the normal retirement age from 65 to 67 years between 2012 and 2029.This implies higher entitlements for those who actually work until age 67 (due to an additional 2 years of contribution payments) but lower benefits for future retirees who, for whatever reason, (have to) claim their first public pension at an earlier age. Exempted from the rising normal retirement age will be workers who had paid compulsory contributions for at least 45 years.13 It was not foreseeable that on a voluntary basis all entitled employees would engage in supplementary provision for retirement. Procrastination, financial illiteracy and lack of money to be put aside can be assumed as the main impediments of supplementary private pension saving. After a slow start, contracts for a Riester pension reached the 16 million threshold at the end of 2014, but the number is almost stagnating since 2011.This would imply a coverage rate of about 40 percent. Moreover, in 2010 little more than 22 percent of the workforce made use of the earnings conversion variant as a pension saving vehicle (Weber and Beck, 2015). Results from another survey (Börsch‑Supan et al., 2014) show that the percentage of working age households participating in supplementary private pension schemes (individual and/or occupational) increased from 27 percent in the early 2000s to 61 percent in 2013, but still 39 percent make no efforts to compensate the declining replacement rate of the public pension scheme with private pension savings, and all studies show a significantly lower participation rate in the lower-income brackets (Geyer, 2012; Börsch‑Supan et al., 2014; Weber and Beck, 2015). Moreover, there is no information available whether those who are engaged in private pension provision did so right from the beginning of their employment career, put aside money also during interruptions (e.g. in case of unemployment or when caring for children or frail elder relatives), or always saved for old age the recommended percentage of their earnings (at least 4%). Nor do we know whether they picked the individually most appropriate and least costly plan from the universe of certified products. Thus, in the future one may expect a much higher degree of economic inequality among retirees than it was found when old‑age security in Germany was predominantly based on the public one‑pillar approach. The pension reforms in Germany since 1989 were not much different from attempts of other Bismarckian welfare states to keep pension spending in check (Hinrichs, 2011b), but they have been rather drastic as can be seen from Table 15.1: between 2000 and 2013 spending on the public pension scheme has declined by 1 percentage point of GDP despite a growing number of people above retirement age. Also the contribution rate levied in 2015 is lower than in 1998 when it peaked (Table 15.2), and there is good reason to believe that the contribution targets (not more than 22% in 2030) will be observed. Thus, the pension reforms including the structural shift of 2001 may have improved the financial sustainability of the public scheme, but – due to the removal of redistributive features and the lowering of the general level – at the expense of socially adequate pensions. Among others, the outcomes can already be read off from the doubling of older and disabled people being dependent on (additional) means‑tested basic security, a development that has pushed the scheme’s poverty alleviation function (back) on the political agenda.14 This is most timely because the reach of past reforms and the calculation of their outcomes do not stretch beyond 2030 when demographic aging will continue. 252

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Current trends and future challenges The trends of the German welfare state arrangement can be described along the four dimensions of analysis as mentioned earlier. Regarding financing, the overarching objective of all governments since the mid‑1990s pursued almost obsessively was to keep the overall social insurance contribution rate below 40 percent – more exactly, not to burden employers with more than 20 percent and, in order to achieve this target, the equal division of the contribution was relinquished. In health care insurance the employers’ share is fixed at 7.3 percent; all further increases will be completely borne by the insured. Similarly with pensions: if workers want to attain the same replacement rate as it was true during the 1990s (and before) they have to save at least 4 percent of their earnings for a “Riester pension” in addition to the public scheme’s contribution rate (presently one-half of 18.7%). The second strategy to attain the contribution target was to introduce (health care) or enlarge (public pensions) tax‑funded revenues of the social insurance schemes. It entails an increased risk that entitlements or benefit levels will be retrenched when the federal government faces fiscal problems.15 Access to social insurance benefits is still predominantly tied to prior contribution payments out of one’s own earnings, but family work generates entitlements as well and means the only expansionary element in pension policy. Childcare credits, first recognized as an equivalent to waged work in 1986, have been improved several times since. For births after 1991 the pension increment is calculated as if the parent has earned an average income for 3 years, and under certain circumstances further credits may be earned until the youngest child reaches age 10. Providing informal care to frail family members is as well rewarded with higher pension entitlements. If one also takes into account the expansion of de‑familializing policies, a clear trend is observable: shrinking social policies centered on the (male) wage earner and expanding policy areas that help to reconcile paid work and family life. The structure of non‑needs‑based cash benefits was meant to secure one’s acquired status and factually marginalized poverty policy. As Bleses and Seeleib‑Kaiser correctly observed some time ago (2004: 92), “the principle of publicly guaranteeing the achieved living standard is on the retreat, while the principle of publicly securing a minimum of existence is increasingly gaining importance.” This trend shows up most clearly in the protection of long‑term unemployed and pensioners and, correspondingly, the political debate centers around the robustness of social insurance schemes to avoid poverty. Those schemes providing cash benefits work smoothly when wage inequality at the bottom is limited. Otherwise benefits of employees with low previous wages do not reach the social assistance level, and they paid contributions in vein. However, a standard career becomes ever more important to attain a sufficient old‑age income, but that is exactly less the case: non‑standard jobs have increased (Hinrichs, 2012) and wage inequality as well (Felbermayr et al., 2015). A first attempt during the previous legislature (2009–2013) to provide better basic benefits for long-term insured pensioners with low entitlements failed, and the present “Grand Coalition” government has agreed upon a similar proposal. Until spring 2015 it has not materialized. Finally, the social insurance units have been forced to adopt a more managerial structure of governance for the day‑to‑day matters. Representatives of employers and employees are confined to supervisory boards, similar to those in joint stock companies. These organizational changes aim at higher efficiency and lower administrative costs which is also true for mergers within the social insurance branches. Recent administrative and organizational restructuring was a relatively low‑profile issue and has not played a central role in substantively changing the German welfare state arrangement. Besides the rising poverty problem, proceeding demographic change poses the second major challenge for the German welfare state. A further rising old‑age ratio16 is inevitable. The 253

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population of working age is already shrinking and, due to the growth of jobs since 2005, skilled workers in various industries are increasingly lacking. A higher female labor force participation rate will not suffice to fill the gaps. More immigrants and a normal retirement age rising beyond age 67 will be necessary, but both issues are much contested political issues.

Summary and conclusion In Germany, structural reforms, emanating from paradigmatic changes, have occurred after the year 2000.The reform efforts point into three distinguishable directions: First, wage replacement schemes, traditionally aimed at status maintenance, are reoriented towards basic protection for pensioners and unemployed. Furthermore, the strategy of reducing the labor supply in view of increased open unemployment after 1974 was abandoned in favor of activating social policy. Instead of income support, the focus is now on a maximum integration of (long‑term) unemployed, older workers and mothers into paid employment. Finally, in order to make welfare state financing more employment‑friendly, there is a shift away from social insurance contributions towards a higher share of tax‑funding, mainly out of the federal purse. The institutional redirection of the German social insurance state has not followed a coherent design for a “new welfare state” (Hinrichs, 2010). Nevertheless, the contours of a still unfinished “Post‑Bismarckian” welfare state arrangement – a hybrid of the real‑typical Anglo‑Saxon and the Scandinavian models (Aspalter, 2012) – are recognizable. Reduced levels of income security through wage earner schemes, accompanied by demands for self‑responsibility and more private provision, stronger reliance on means‑tested benefits, and stricter activation measures signify the turn towards the liberal model. Activation is also a central trait of the Scandinavian policy design, but more important reform trends related to that model are increased tax financing (the prime direction of reform efforts) and more spending on family‑oriented services and other social investments. Although we have witnessed unprecedented structural reforms, mainly after the millennium, political attempts to arrive at an employment- and family‑friendly “post‑Bismarckian” shape of the welfare state have been hampered by a combination of unfavorable and inter-related factors which constrain the room to maneuver: Low economic growth rates in almost all the years after 1992, picking up not before 2005, resulted in an almost stagnant employment level and enlarged the “problem load.” The costs of unification remained an impediment to attaining an overall balanced public budget and narrowed the opportunities to further shift welfare state financing away from contributions. Finally, within given political structures in Germany, drastic (and sometimes even small) reforms require a high degree of consensus among the political actors involved, and party politics has notably slowed down (if not recurrently foreclosed) changes in the welfare state edifice. Larger leaps of policy change are only possible when, temporarily or on a certain issue, party competition is neutralized by a tacit or actual “Grand Coalition” of the two large political parties, and that is the way the substantial reconstruction of the German welfare state occurred.

Notes 1 It is worth mentioning that the enrichment of the labor contract with individual and collective status rights regulating dependent labor and its exchange by means of state intervention and the achievements of collective bargaining is still an important element of the German social policy arrangement. However, the “standard employment relationship” taken as a point of reference for protective regulation discriminates against workers holding a non‑standard job and privileges the “insiders” (Hinrichs, 1991; Schmidt, 2012: 175–177). 254

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2 In 2015, the ceiling is €49,500 for health and LTC insurance and €72,600 for the unemployment and pension scheme. 3 On behalf of the recipients of cash benefits the respective social insurance scheme actually transfers contributions to other schemes (e.g., from unemployment insurance to the sickness funds, the pension and, nowadays, also to the LTC scheme). Due to this financial interdependence, rule changes in one scheme (e.g., of the contribution rate) often affect the financial status of other schemes as well. 4 When employer’s wage continuation payment (100%) ends after 6 weeks, sick pay regularly amounts to 90 percent of net earnings; the unemployment insurance benefit (ALG I) replaces 67 percent (without children: 60%). 5 The subsidy amounted to €11.5 billion in 2013, which was 6 percent of the health insurance scheme’s expenditure (Bundesrechnungshof, 2014: 98). 6 The benefit amounts were not adjusted between 1995/1996 and 2008, and the subsequent increases remained below the inflation rate for professional care services so that the gap between LTC benefits and actual nursing fees enlarges. 7 They emanated from proposals of a reform commission named after its chairman Peter Hartz, then member of the executive board of Volkswagen. 8 As a third innovation it may be regarded that old‑age (and disability) pensioners with insufficient resources are no longer referred to the general social assistance scheme, but rather since 2003 are entitled to benefits from a special basic security scheme which are still means‑tested and not higher than before. However, the traditional obligation of adult children to financially support their elder parents is lifted. This innovation can be understood as a pre-emptive policy: eased and less stigmatized access to benefits from the new scheme is meant to make the combined effects of a more flexible labor market (fewer regular full‑time employment careers) and of past and future pension retrenchments socially more bearable. 9 An example: a single mother with two children born before 2008 earns a total income of €30,000 per year. The recommended amount of savings is €1,200 (4 percent of €30,000). The “basic subsidy” is €154, and the “child subsidy” is €370 (2 × €185).The total amount of subsidies is €524, so that she has to raise merely €676 out of her net income. 10 Another example: an employee (single, no children) earning €60,000 per year should save €2,400. She is entitled to the “basic subsidy” of €154 and may deduct up to €2,100 from her taxable income. Then she profits from a corresponding tax savings from which the (already received) subsidy of €154 will be subtracted. 11 This type of retirement savings plans very much resembles the 401(k) plans in the US which have become the dominant type of employer‑sponsored pension provision there (Munnell and Sundén, 2004). 12 The Constitutional Court had obliged the government to universally shift to the so-called EET principle (contributions/savings and asset returns = “exempted” from taxation; benefits = “taxed” upon receipt). It also applies to the new private pension saving vehicles. 13 Temporarily, long-term insured workers (45 years including periods of receiving unemployment insurance benefits) are given the opportunity to retire without deductions already at age 63.This option will phase out and for birth cohorts 1964 and later the limit will be age 65 again. This measure was part of an expansionary reform package legislated in 2014 and meant to improve the relationship between the Social Democrats and the trade unions’ core clientele, whereas the Christian Democrats insisted on adding a second year of childcare credit for mothers who had given birth to children before 1992. It gratifies particularly women born before about 1965, a group of most faithful voters for this party. 14 Even the OECD (2014: 118–119, 122) in its latest report on Germany emphasizes the comparatively low general replacement ratio of public pensions for future retirees and the high risk of old‑age poverty for non‑standard workers. 15 At present, however, the government is able to give priority to a balanced budget by (temporarily) cutting transfers to the social insurance schemes and to keep the total contribution rate below the 40-percent threshold without (further) restraints on the benefit side. 16 That is the population aged 67 and older as proportion of the population in the age bracket 20–66. According to the intermediate variant of projections the figure will rise from about 30 at the beginning of this decade to 42.7 (2030) and then to 52.9 in 2050 (from Federal Statistical Office database).

References Aspalter, C. (2012), Real‑Typical and Ideal‑Typical Methods in Comparative Social Policy, in B. Greve (ed.), The Routledge Handbook of the Welfare State, Routledge: London. 255

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Berlin.Weber, T. and Beck, M. (2015), Entgeltumwandlung in Deutschland. Eine Analyse auf Basis der Verdienststrukturerhebung 2010, Wirtschaft und Statistik, No. 1, pp. 56–74. Bleses, P. and Seeleib‑Kaiser, M. (2004), The Dual Transformation of the German Welfare State, Palgrave Macmillan: Houndmills, Basingstoke. Bönker, F. (2005), Der Siegeszug des Mehrsäulenparadigmas in der bundesdeutschen Rentenpolitik. Eine Analyse auf Grundlage der “Ideenliteratur,” Zeitschrift für Sozialreform,Vol. 51, No. 3, pp. 337–62. Börsch‑Supan,A.; Bucher‑Koenen,T.; Coppola, M., and Lamla, B. (2014), Savings in Times of Demographic Change: Lessons from the German Experience, Munich Center for the Economics of Aging (MEA) at the Max‑Planck‑Institute for Social Law and Social Policy, MEA Discussion Papers, No. 18‑2014, Munich, Germany. BMAS, Bundesministerium für Arbeit und Soziales (2014), Sozialbudget 2013, BMAS: Berlin. Bundesrechnungshof (2014), Bemerkungen des Bundesrechnungshofes 2014 zur Haushalts‑ und Wirtschaftsführung des Bundes, Deutscher Bundestag, Drucksache 18/3300 (v. 01.12.2014), Berlin. Clasen, J. (2005), Reforming European Welfare States: Germany and the United Kingdom Compared, Oxford University Press: Oxford. Cox, R. H. (2001),The Social Construction of an Imperative:Why Welfare Reform Happened in Denmark and the Netherlands but Not in Germany, World Politics,Vol. 53, No. 3, pp. 463–98. Deutsche Rentenversicherung Bund (2014), Rentenversicherung in Zeitreihen. Oktober 2014, DRV-Schriften, Band 22, Deutsche Rentenversicherung Bund: Berlin. Esping‑Andersen, G. (1996),Welfare States Without Work:The Impasse of Labor Shedding and Familialism in Continental European Social Policy, in G. Esping‑Andersen (ed.), Welfare States in Transition: National Adaptations in Global Economies, Sage: London. ———. (1999), Social Foundations of Postindustrial Economies, Oxford University Press: Oxford. Felbermayr, G.; Baumgarten, D., and Lehwald, S. (2015), Wachsende Lohnungleichheit in Deutschland, welche Rolle spielt der internationale Handel? Bertelsmann Stiftung: Gütersloh, Germany. Geyer, J. (2012), Riester‑Rente und Niedrigeinkommen – Was Sagen die Daten? Vierteljahrshefte zur Wirtschaftsforschung,Vol. 81, No. 2, pp. 165–80. Götting, U.; Haug, K., and Hinrichs, K. (1994),The Long Road to Long‑Term Care Insurance in Germany: A Case Study in Welfare State Expansion, Journal of Public Policy,Vol. 14, No. 3, pp. 285–309. Hain, W.; Lohmann, A., and Lübke, E. (2004), Veränderungen bei der Rentenanpassung durch das “RV‑Nachhaltigkeitsgesetz,” Deutsche Rentenversicherung,Vol. 59, No. 6–7, pp. 333–49. Hinrichs, K. (1991), Irregular Employment Patterns and the Loose Net of Social Security: Some Findings on the West German Development, in M. Adler, C. Bell, J. Clasen, and A. Sinfield (eds.), The Sociology of Social Security, Edinburgh University Press: Edinburgh. ———. (2005), New Century – New Paradigm: Pension Reforms in Germany, in G. Bonoli and T. Shinkawa (eds.), Ageing and Pension Reform Around the World: Evidence from Eleven Countries, Edward Elgar: Cheltenham. ———. (2010), A Social Insurance State Withers Away, Welfare State Reforms in Germany – or: Attempts to Turn Around in a Cul‑de‑sac, in B. Palier (ed.), A Long Goodbye to Bismarck? The Politics of Welfare Reforms in Continental Europe, Amsterdam University Press: Amsterdam. ———. (2011a), Dissolving the Bismarckian Pension Regime in Germany: An Example of Reforms Leading to a “Multi‑Pillar” System, Taiwanese Journal of Social Welfare,Vol. 9, No. 2, pp. 91–133. ———. (2011b), Pension Reforms in Europe: Directions and Consequences, in I. E.Vural (ed.), Converging Europe:Transformation of Social Policy in the Enlarged European Union and in Turkey, Ashgate: Aldershot. ———. (2012), Germany: A Flexible Labour Market Plus Pension Reforms Means Poverty in Old Age, in K. Hinrichs and M. Jessoula (eds.), Labour Market Flexibility and Pension Reforms: Flexible Today, Secure Tomorrow? Palgrave Macmillan: Houndmills, Basingstoke. Hinrichs, K. and Warfelmann, A. C. (2011), Long‑Term Care Insurance in Germany, Journal of Intimate and Public Spheres,Vol. 1, No. 1, pp. 133–51. Kommission Nachhaltigkeit in der Finanzierung der Sozialen Sicherungssysteme (2003), Bericht der Kommission, Bundesministerium für Gesundheit und Soziale Sicherung: Berlin.

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Munnell, A. H. and Sundén, A. (2004), Coming Up Short:The Challenge of 401(k) Plans, The Brookings Institution: Washington, DC. OECD (2014), OECD Economic Surveys: Germany 2014, OECD: Paris. Palier, B. (ed.) (2010), A Long Goodbye to Bismarck? The Politics of Welfare Reforms in Continental Europe, Amsterdam University Press: Amsterdam. Pierson, P. (2001), Coping with Permanent Austerity:Welfare State Restructuring in Affluent Democracies, in P. Pierson (ed.), The New Politics of the Welfare State, Oxford University Press: Oxford. Scharpf, F. W. (2002), Globalization and the Welfare State: Constraints, Challenges, and Vulnerabilities, in R. Sigg and C. Behrendt (eds.), Social Security in the Global Village, Transaction: New Brunswick, NJ. Schmähl, W. (2007), Dismantling an Earnings‑Related Social Pension Scheme: Germany’s New Pension Policy, Journal of Social Policy,Vol. 36, No. 2, pp. 319–40. Schmidt, M. G. (2012), Wirklich nur Mittelmaß? Deutschlands Sozialstaat im Spiegel neuer, international vergleichender Daten, Zeitschrift für Staats‑ und Europawissenschaften,Vol. 10, No. 2, pp. 159–95. Sozialbeirat (1998), Gutachten des Sozialbeirats, in Bundesregierung, Rentenversicherungsbericht (ed.), Deutscher Bundestag, Drucksache 13/11290 (v. 17.07.1998).

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16 The Austrian welfare state system With special reference to the long-term care system Kai Leichsenring

The roots of the Austrian system of social security reach back to the second half of the 19th century, when first steps towards poor relief, worker protection and eventually rudimentary social insurance were introduced by the Habsburg monarchy. It matched the pattern of Bismarck’s response of the German Empire to the ever more pressing workers’ movement.With the introduction of an old-age insurance for white-collar employees, but in particular after the fall of the Habsburg monarchy, important social policy decisions were taken during the 1920s with the introduction of an unemployment insurance, the 8-hour working day and the extension of the pension insurance to other categories of workers (Tálos, 1982). While this development had however been interrupted during the period of Austrofascism (1934–1938) and with the annexation of Austria to National Socialist Germany (1938), the restoration of the Austrian social security system after World War II was to a large degree based on the social security rationales from the turn of the century. With the implementation of the General Social Security Act (Allgemeines Sozialversicherungsgesetz, ASVG), the cornerstone of a full-fledged Austrian social security system was set in 1955, followed by continuous amendments to increase coverage, individual provisions and its financial basis, consisting of contributions from employers, employees/workers and the state (Obinger and Tálos, 2006). Apart from the general social risks (accidents, health, unemployment, old-age) that are addressed by the ASVG, a wide range of social welfare issues are regulated by fragmented responsibilities at the federal and the regional government levels. Today, social security provisions regarding pensions, unemployment, health care and disability largely cover Austria’s 8.5 million inhabitants. A total of 4.1 million Austrians are in the labor force (about 72.3% of the population between 15 and 64 years of age), while the unemployment rate of 4.9 percent (Eurostat) is one of the lowest within the European Union, to which Austria adhered in 1995. About 2.3 million citizens are receiving one or several (14%) types of pensions, including for instance about 196,000 people below old-age pension age with a disability pension (Statistik Austria, 2014). Almost 100 percent of the population is covered by health insurance, and families are supported by provisions (family and childcare allowances, subsidies for transport and textbooks) from the federal Family Burden Compensation Fund 258

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(Familienlastenausgleichsfonds, FLAF). With around 28 percent of GDP total public spending on social security (including health), Austria is significantly above the OECD average of about 22 percent (OECD, 2014). As in most other countries, long-term care (LTC) has been acknowledged only as one of the latest social risks that calls for solidarity and public attention also in Austria. However, Austria is an interesting case study for long-term care because it was the first country in Europe that introduced a universal coverage of cash-benefits (LTC allowances) as the main instrument to finance long-term care. As a consequence, today, Austria has one of the highest shares of older citizens entitled to LTC allowances among all European (and OECD) countries (Figure 16.1), it represents a group of countries with public expenditures between 1 and 1.7 percent of GDP on LTC (Figure 16.2), and it is part of a group of countries with a standard care mix consisting of a large amount of informal care, complemented by public, non-profit and commercial care provision. Following a brief summary overview of the system, this chapter will focus specifically on the construction of social welfare provisions to support people with long-term care needs. As these are in their majority represented by citizens above the age of 75, some basic information concerning demography and definitions of long-term care will be complemented by an overview on eligibility and availability of services in cash and in kind. The chapter will end with an overview of current trends in Austrian social policies.

6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% DK

DE

EL

ES

FR

IT

NL

AT

SI

SK

FI

SE

UK

Older people with assessed care needs (national definitions) as a percentage of total population Public expenditure for LTC as a percentage of GDP Figure 16.1 Share of older people with assessed care needs as a percentage of the population and public expenditure (selected European countries) Source: OECD Health Statistics (2013), Rodrigues et al. (2012); author’s own calculations.

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Kai Leichsenring 4.0

Health LTC

3.5

Social LTC

3.0 2.5 2.0 1.5 1.0 0.5

Netherlands Sweden Norway Denmark Finland Belgium France Japan Iceland OECD11 Switzerland NewZealnad Canada Austria Luxembourg Slovenia Germany Spain United States Korea Israel Poland Chech Republic Hungary Estonia Portugal Greece

0.0

Figure 16.2 Long-term care public expenditures: health and social components (as share of GDP, 2011, or nearest year) Source: OECD Health Statistics (2013).

Major characteristics of the Austrian welfare state system Social security in Austria is mainly organized by the following interventions: Social insurance providing sickness, pension and accident insurance to defined population groups in return for mandatory contributions is based on federal legislation and administered by tripartite self-governance through 29 social insurance agencies with territorial and corporatist divisions. Social assistance as the means-tested “second safety-net” is governed by the nine provincial governments and funded by general taxes. Labor-market policies are centrally regulated but regionally implemented by outsourced quasi-public agencies. Family policies that are driven by the federal “Family Burden Compensation Fund.” Other types of support for victims of war and crime, people with disabilities – and longterm care needs. (Familienlastenausgleichsfonds, FLAF) The Austrian welfare state is generally characterized by a corporatist approach to social security that fosters access in the first place via employment. It is oriented towards ensuring the individual living standard according to social insurance contributions by employers and employees. Although the single-breadwinner model has been modified in the context of increasing labor market participation of women, access to social security provisions is also linked to marriage, for example via co-insurance of family members in the health insurance and by means of survivor 260

The Austrian welfare state system

pensions. These characteristics as well as the distribution of responsibilities between the federal state and the provinces has undergone a number of modifications over the past decades due to societal changes with respect to family structures, demographics, economic crises and related new societal challenges. Furthermore, shifts in political power structures and the traditional Austrian model of social partnership as well as the accession to the European Union have contributed to an adaptation of the “conservative” Austrian welfare regime across the whole range of social policies. It will be shown that a number of reforms have blurred the rationales of the traditional developmental path of a Bismarck-type welfare regime.

Pension policies Austrian pensions are provided on the pay-as-you-go principle with defined benefits based on the so-called Generation Contract between people at working age and those above pension age, which is legally set at 60 for women and 65 for men. Private pensions or capital-based company pensions are playing no significant role in Austria. Compulsory pension contributions for workers and employees are deducted automatically from their monthly gross wage (a total of 22.8 percent including employers’ contributions). Before the pension reform in 2003 many other professional categories such as employers, farmers, liberal professions and civil servants, however, had their own pension regulations, with different contribution rates and retirement ages, fictitious employer contributions (e.g. civil servants) and a variety of calculation formulas leading to different replacement rates.Table 16.1 shows the impact of these differences on the current level of pensions reflecting the underlying principles of status protection according to types of employment and previous income, and thus also the discrimination of women during and beyond their (often patchy) working careers. In addition, the design of the Austrian pension system is characterized by the following caveats (cf. Marin, 2013): The contributions of the active population have never completely covered current expenditures, even when the ratio between the population 65+ to the population at working age had been about 4:1 during the 1960s. A state subsidy of about one third of total expenditures has therefore always been an important part of pension funding, in particular for civil servants and self-employed categories. In addition, the Austrian pension system also grants a type of minimum pension to those with insufficient amounts of contributions – this equalization supplement guarantees a means-tested monthly rate currently set at about 860 Euro (2014), thus reducing the risk of poverty in old age, which is still at about 16 percent of all pensioners. Table 16.1 Average monthly pension payments by professional categories (2013) Category Blue-collar workers Employees Railway employees Employers/self-employed Farmers Solicitors Civil servants (2012)

Average pension per month in €

828 1,362 1,151 1,223 738 4,220 2,731

Men

Women

1,088 1,826 1,477 1,585 1,000 5,317 2,768

642 1,111 841 913 599 2,647 2,603

Source: Statistik Austria (2014) (http://www.statistik.at).

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Since the 1980s pension policies have been used to “hide” the rise of unemployment by means of early retirement of older workers. Although it has been tried to reverse this trend since the mid-1990s, when Austria joined the European Union, the effective retirement age has remained at around 57 for women and 59 for men (HVSV, 2014).1 In conjunction with a rising life-expectancy over the past decades this has fostered growing concern about the sustainability of a system in which ever few people in employment have to sustain ever more pensioners. Policies to incentivize longer employment of older workers have been rather unsuccessful over the past few years. The historically grown differences between pension schemes of various professional categories have resulted in a lack of actuarial neutrality and fairness as well as a lack of transparency (pension privileges) with adverse redistribution effects. The different legal retirement age set for men at 65 and for women at 60. Given these inconsistencies, pension reforms during the past decade, in particular the introduction of the new General Pension Act (2003), were focused on disincentivizing early retirement by means of deductions, the “harmonization” of schemes, including the gradual equalization of the legal retirement age of men and women between 2024 and 2033 (Knell et al., 2006). The new regulation is valid for all people born after January 1, 1955, for whom all contributions paid before 2005 were recognized proportionately according to the previous scheme. In particular, more transparency should be provided through a virtual “pension account” that was started in 2014. It will facilitate tracking individual contributions over the life course and to calculate one’s own pension in advance. The (rather optimistic) aim is to foster a replacement rate of 80 percent of the assessment base2 for 45 years of contributions at the age of 65. Still, real incentives for working longer remain scarce so that “the imperative for the next 15 years is, above all, to shift the effective retirement age upwards towards the legal age” (Marin, 2013: 225). Under the current regulations and given the increasingly discontinuous career patterns it is likely that real pension levels will significantly decline over the coming decades, and that additional public subsidies might be needed.

Needs-oriented minimum coverage In the area of social assistance a major policy reform was realized in 2010 when, following ample political discussions between all stakeholders, the “second safety-net” was streamlined across Austria towards a “needs-oriented minimum coverage” (NOMC) with reinforced links to active labor market policies (ÖKSA, 2012). As the nine provincial governments are responsible for social assistance by constitutional law, an agreement between the federal state and the provinces had to be set up to redefine competencies and funding mechanisms. The NOMC improved the hitherto restricted accessibility to social assistance, which had also been marked by a high non-take-up rate due to the social stigmatization of social assistance beneficiaries. The reform also increased and streamlined the amounts granted with those in the ­pension system to compensate for low pensions (Ausgleichszulagen-Richtsatz). In 2014, this amount was set at €813.99 per month for single households (€1,220.99 for couples). Furthermore, the reform abridged bureaucratic procedures and reduced or even abandoned regression payments by family members and from assets below about €4,000. Beneficiaries of the NOMC now also enjoy full health insurance coverage, and they are considered as job-seekers with related rights for subsidies to participate in active labor market initiatives of the regional Employment Services (Arbeitsmarktservice, AMS).

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As the NOMC is still below the official poverty threshold of about €1,100 per month it certainly remains a partial contribution to combat poverty threats and social exclusion to which 18.8 percent of the population were exposed in 2013.3 However, the fact that their share decreased by 1.8 percentage points since 2008, that is during the period of economic and financial crisis, as well as first assessments showing that a significantly increasing proportion of NOMC recipients could be reintegrated into the labor market might be indicators for a success of the reform (Bergmann et al., 2012). Further improvements in terms of better administrative coordination (one-stop shop),4 streamlining between regions and case management to support those people who are threatened by social exclusion have been requested, but these amendments need to be underpinned by broader reforms in the areas of education, family and labor market policies (Stanzl and Pratscher, 2012).

Labor market policies While employment has remained the key mechanism both for individual and social security, major changes in the structure and governance of labor markets have challenged the traditional model of welfare state development. Post-industrial societies such as Austria have witnessed not only a strong move to the “tertiary sector” but also the emergence of more flexible labor market regulations, the rise of so-called atypical employment (short-term contracts, part-time work, labor leasing, etc.) and interrupted employment histories as well as declining shares of national income accounted for by wages. Austria has fared relatively well in adapting to these new challenges, in particular as unemployment rates below 5 percent have for a long time been among the lowest in OECD countries, even during the recent economic and financial crises.This relative success is also due to the rising importance given to active labor market policies (ALMP) since the 1990s. In 2013, there were about 215,000 unemployed within a labor force of about 3.6 million employees and about 480,000 self-employed and farmers (who are not covered by the unemployment insurance). The Austrian labor market policy is implemented by the quasi-public Employment Service and include the following tasks as defined by the Labor Market Promotion Act (BMASK, 2013b): Matching supply and demand by means of job placement and the elimination of obstacles to the placement of workers, in particular by retraining and upskilling according to labor market needs, Increasing the transparency of the labor market, Providing a subsistence income to the unemployed within the framework of unemployment insurance. Total expenditures for active and activating labor market policies have more than doubled since 2002 and amounted to about €2.2 billion in 2013 (as against €4.4 billion for unemployment benefits). A special focus has been given both to younger people who are entering the labor market (e.g. a guarantee of places for apprenticeships, youth coaching) and to investments that help keep older workers in employment. For the latter target group, between 2012 and 2016 €750 million will be dedicated to special programs for vocational rehabilitation, wage subsidies and a joint initiative of public agencies to support and keep older workers “fit2work” (BMASK, 2013b). A specific challenge for labor market policies and social protection is the increasing share of non-standard forms of employment such as part-time work with less than 12 hours per week,

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temporary work, fixed-term contracts, labor leasing or “insignificant employment” with a payment below a certain threshold (currently about €380) with no or restricted social security contributions and entitlements. Including all part-time workers, about one-third of employees are working in atypical employment, in particular almost 50 percent of women. While 87 percent of male employees have still open-ended full-time contracts, this is the case for only 52 percent of women in employment (Geisberger and Knittler, 2010). Non-standard forms of employment often come with lower wages and a reduced social security that, again, mainly applies to women and to a large extent in the important sector of travel and leisure. Measures to extend “flexicurity” measures, that is to allow for flexibility in labor supply by guaranteeing appropriate social security, will have to be further developed.

Health policies The Austrian health system is covering more than 99 percent of the population and offers a wide range of services free of charge to lower-income groups who are exempt from out-of-pocket payments. Although based on the social insurance principle, universal coverage is reached by co-insurance of family members, obligatory health insurance of employers and self-employed, and the linkage of all income support mechanisms to health insurance. Free choice of providers and unrestricted access to health care are guiding principles. This is facilitated by a mixed funding system in which income from social health insurance contributions are supplemented at almost equal shares by general tax income. This entails that both self-governance of 18 regional and corporatist agencies and the federal structure are shaping the area of health policies, resulting in a fragmentation of responsibilities and a lack of coordination. Although the general legal framework is for the most part decided on the federal state level, provincial governments are for instance responsible for planning and co-funding of hospitals (Hofmarcher and Quentin, 2013). Total health expenditures (without expenditures for long-term care) in Austria amount to €29.2 billion (2012) or 9.2 percent of GDP, with public expenditures (taxes and social insurance contributions) covering about three-quarters of the total revenue. Private out-of-pocket contributions and private insurance make up for about 17 percent, respectively 4 percent of total expenditures. While health expenditures have tended to increase at a higher pace than GDP, latest reforms have focused on improvements in primary care, preventative services and a reduction of hospitals. Furthermore, these reforms aim at improving coordination between governance levels as well as between the various health care sectors both in terms of planning and in monitoring outcomes.

Special focus: the long-term care system With about 1.5 million people over 65 years of age (18.2 percent of the population), Austria has a relatively aged population even for EU standards, and the aging process is not likely to stop in the next decades. As the health status of older people is an important determinant in shaping the demand for long-term care the projected rising number of people above the age of 80 will contribute to rising demand, even if the proportion of older people with a rising healthy life-expectancy will increase. A specific challenge for the development of long-term care in Austria consists in the fact that demographic aging takes place particularly in rural areas, with respective problems concerning accessibility and the organization of support structures in alpine regions. Although this scenario has been reported repeatedly over the past decades, long-term care policies have for a long time remained in the shadows. Indeed, it was the disability movement 264

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that triggered the political debate about comprehensive care allowances during the 1980s, when various organizations of people with disabilities yielded concerns about inconsistencies in treatment of different groups and gaps in coverage. This debate, however, eventually resulted in the introduction of a comprehensive system of long-term care allowances in 1993. This reform responded to the hitherto fragmented system of allowances that had existed to cover need for long-term care under various schemes and with different responsibilities across the social security system. The new system of a comprehensive long-term care allowance (Pflegegeld ) replaced and unified the existing schemes (Evers et al., 1994; OECD, 2005). As a first step towards standardization, however, a state treaty and nine more or less corresponding provincial Long-Term Care Allowance Acts had to be adopted, as the nine provinces responsible for long-term care by constitutional law. Thus, funding for the long-term care allowance (from general taxes) became a responsibility of the federal state while the provincial governments remained responsible for services in kind.This situation was slightly amended in 2010, when another reform step centralized all responsibilities for benefits in cash at the national level, while the provincial governments continue to be responsible for long-term care facilities and services. Since the implementation of the Long-Term Care Allowance Act (BPGG) in 1994, all citizens in need of care, irrespective of age, are eligible for the same amounts of attendance allowances that are granted without means-testing, but according to a needs assessment in seven levels reaching from €154.20 to €1,655.80 per month (see Table 16.2). The allowance has been conceived as a “flat-rate contribution to compensate for expenditures caused by care needs in order to facilitate the necessary help and support for people with long-term care needs, and to improve their opportunities for independent living according to their needs” (BPGG, §1; own translation). This rationale did not interfere with either social insurance-based health legislation or with social assistance-related regulations for social services and long-term care facilities. Indeed, if – according to medical rationales – a person cannot be cured anymore and is in need of long-term care, it is up to the individual to cater for respective care, rather than the health insurance. If the person in need of long-term care moves to a care

Table 16.2 The Austrian Long-Term Care Allowance 2014 Level

Care needs per month

I II III IV V VI

> 65 hours > 95 hours > 120 hours > 160 hours > 180 hours of heavy care > 180 hours of constant attendance VII > 180 hours of care in combination with complete immobility Total number of beneficiaries

Amount in € per month

Beneficiaries

€154.20 €284.30 €442.90 €664.30 €902.30 €1,260.00

104,393 130,830 78,170 63,463 46,089 18,806

23.1% 29.0% 17.3% 14.1% 10.2% 4.2%

9,435

2.1%

451,159

100.0%

€1,655.80

Beneficiaries in percent per level

Notes: values as paid by 1/1/2014; as of 12/31/2013. a

b

Source: BMASK (2014a), own calculations.

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home, for instance, s/he has to use his/her income and the long-term care allowance granted upon application. If these amounts (and potential assets) do not cover all costs – which is most likely with fees for a place in a nursing home amounting to up to €6,000 – provincial welfare offices will step in according to the social assistance rationale, that is only if the individual pension, care allowance and assets do not cover all expenditures, social assistance may provide funding. However, the long-term care allowance as such is not earmarked so that it may also be used to purchase subsidized home care services, to compensate a family carer or to increase the general household budget (Hammer and Österle, 2006). Indeed, about 80 percent of beneficiaries are cared for mainly by spouses and daughters, but also by sons and/or other family members without ever using professional support by home care services. Given these key features, the Austrian long-term care allowance cannot easily be labeled as this scheme is neither part of the social insurance system nor an explicit element of social assistance schemes. Still, with yearly expenditures of about €2.47 billion for about 451,000 beneficiaries (in 2013; BMASK, 2014a), of which 60 percent are over 80 years of age, it has become an important budget line. Together with net expenditures of about €2 billion by provincial governments to subsidize care homes and long-term care services, the sector of long-term care is currently accounting for about 1.4 percent of GDP and for about 5.6 percent of total social security and health care expenditures (Eurostat, SOCX). While these expenditure levels are only slightly above the average of Western European welfare states, they are still relatively low compared to Sweden or the Netherlands (Rodrigues et al., 2012). Due to the constantly rising demand5 and general cuts in public spending, current policies tend to restrict access conditions, for example by increasing the thresholds for eligibility in lower levels of care needs. These restrictive tendencies are likely to neglect the fact that strengthening the purchasing power of people with long-term care by means of cash benefits and subsidized services has triggered a number of economic and societal advances that must not be underestimated. First, since the mid-1990s, although from a very low level, the supply of long-term care services and facilities has steadily increased, for example the number of hours provided in home care doubled to now about 16 million hours of care per year (Table 16.3). At the same time, also the number of places in residential care facilities increased significantly (Table 16.4).

Table 16.3 The development of home care services in Austria (mid-1990s to 2013) Region

Mid-1990s

2000

2007

2013

Difference 2000–2007

Difference 2007–2013

Burgenland Carinthia Lower Austria Salzburg Styria Tyrol Upper Austria Vienna Vorarlberg Total

150,136 447,329 1,643,582 687,481 586,038 124,250 543,506 4,330,422 105,000 8,617,744

204,484 540,860 2,838,208 805,454 857,435 298,776 794,002 4,017,591 235,443 10,592,253

271,480 799,130 3,411,904 661,059 858,604 565,332 1,322,010 4,669,386 426,243 12,985,148

270,305 890,665 3,399,506 852,999 1,155,885 951,606 1,686,956 5,748,720 902,257 15,858,899

−0.4 % 11.5 % −0.4 % 29.0 % 34.6 % 68.3 % 27.6 % 23.1 % 111.7 % 22.1 %

32.8 % 47.8 % 20.2 % −17.9 % 0.1 % 89.2 % 66.5 % 16.2 % 81.0 % 22.6 %

Note: Some data are not comparable over time (break in time-series) and between regions (different reporting guidelines). Source: BMASK, different years; own compilation.

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The Austrian welfare state system Table 16.4 Development of residential care: places in care homes (2000–2013)

Burgenland Carinthia Lower Austria Salzburg Styria Tyrol Upper Austria Vienna Vorarlberg Total

2000

2005

2013

Change in %

Alternative Housing (2013)

1,297 2,761 9,589 2,501 (6,000) 4,800 11,219 17,653 2,271 58,091

1,554 3,785 10,468 3,199 8,720 4,873 11,285 19,316 2,932 66,132

2,065 6,542 12,016 4,195 13,273 5,887 13,090 13,430 2,223 72,721

59.2% 136.9% 25.3% 67.7% 121.2% 22.6% 16.7% −23.9% −2.1% 25.2%

– 108 – – 1,121 – 43 10,010 98 11,380

Note: Numbers in brackets are estimates; some data are not comparable over time (break in time-series) and between regions (different reporting guidelines). Source: BMASK, different years; own compilation.

Home care services are almost exclusively provided by private non-profit organizations, while residential facilities are managed by public (50%), private non-profit (25%) and commercial (25%) provider organizations. Second, the sector has contributed to a steady growth in employment, thus mainly contributing to a rising share of women in the labor market. Third, considering the social return on investment of, for instance, home care where each euro invested is likely to foster monetary values of between €2.50 and €3.70 (Schober et al., 2012), the positive impact of developing long-term care services and facilities should not be neglected. However, the use of cash benefits as a key driver for long-term care development also entails a number of caveats that call for additional endeavors to avoid undesirable consequences (Österle and Bauer, 2012).These include the support of family carers, the regulation of “grey” markets in care, and the further development of an integrated long-term care system.

Supporting family care As for many other countries, the general goal in long-term care is to keep people in need at home as long as possible. While this type of (family) care has for a long time and almost exclusively been provided by women and free of charge, societal changes, in particular the rising labor market participation of women and growing mobility, but also mounting longevity even with disabilities, have put this model under huge pressure. This pressure continues to be sustained by a large number of family carers – in Austria these count for at least 400,000 people – who would need respite, support and social security (Pochobradsky et al., 2005). Although a number of provisions have been introduced over the past two decades (e.g. social insurance contributions for carers, enhanced care counseling, care leave for employed carers, extension of day care and other support facilities), cash benefits that cover only a small part of care related incremental costs are only a minor incentive for family carers who are predominantly driven by family ethics in terms of duty, love and devotion. Reportedly about 15 percent of family carers are reducing or completely abandoning paid employment (Badelt et al., 1997), which may be quite risky for the duration of care episodes may hardly be forecasted, in particular as re-entering the labor market has become tougher for older workers. In sum, mere cash benefits do not suffice to support a better balance between employment and care, and to provide respite to overburdened family carers. 267

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From moonlighting to regular care arrangements: the case of migrant carers The rising pressure on families, the lack of (affordable) services and the geographic vicinity to a number of transition countries with low wages and high unemployment have contributed to the emergence of a phenomenon that has been coined as a functional equivalent to family care, namely the employment of live-in personal assistants. In Austria, this type of care is called 24-hour assistance, which is mainly provided by migrant carers, usually from neighboring countries such as Slovakia, the Czech Republic and Hungary (the Slovak border, for instance, is only 50 km east of Vienna). This phenomenon originally developed as a “grey” market breaching a range of legal regulations from labor and social security law to regulations concerning the employment of migrant workers. In most cases they remain 14 days with the person they care for before being replaced by a colleague and returning for their next turn 14 days later. This arrangement often compensates for the lack of affordable services, in particular for people who need more than two hours of care per day and do not want to move to a care home. However, following a number of scandals and public debates involving also highly ranked politicians who had employed migrant carers “illegally,” in 2007 the Austrian government adopted a range of measures to regulate 24-hour care by amending current labor market, social insurance and professional regulations. The so-called Home Assistance Act (Hausbetreuungsgesetz) introduced the possibility to either employ the assistant or to register as a self-employed personal assistant against proof of having passed at least 200 hours of relevant training. It also legalized the common practice of fortnightly shifts during which the personal assistant may work up to 128 hours, but no more than 11 hours per day (Schmidt et al., 2015). Furthermore, means-tested subsidies were foreseen for households employing migrant carers and/or other informal carers, including family members. In order to compensate for higher costs that occur for regular employers through taxes and social security contributions, subsidies between €250 and €1,100 per month are granted to beneficiaries of the long-term care allowance with a monthly income below €2,500 (BMASK, 2013a).The number of beneficiaries of these means-tested subsidies has risen consistently since 2008 (Figure 16.3). These measures resulted in a steep rise of regular 24-hour care arrangements with selfemployed personal assistants, as beneficiaries feel hesitant to take on a new role as employer, and personal assistants consider this type of arrangement more appropriate to their role as migrant workers with persisting roots in their home country. However, some private non-profit organizations that are active in the area of long-term care have also started to integrate this kind of service (brokerage, employment of 24-hours assistants) into their activities, thus catering for better integration and quality assurance (Schmidt et al., 2015). By 2013, about 45,000 personal carers were registered as active self-employed personal assistants with the Austrian Chamber of Commerce, so that it can be assumed that about 22,000 beneficiaries of the long-term care allowance (about 5 percent of all beneficiaries) have opted for this type of care arrangement (Schmidt et al., 2015). It may be argued whether 24-hour care by migrant carers will be a sustainable model for the future, when wages will level out and also Austria’s neighboring countries will expand their long-term care systems. In any case a number of ethical and welfare-related issues concerning 24-hour care arrangements remain to be addressed in a wider European context as similar experiences can be observed in other EU member states, e.g. the Mediterranean countries and Germany, but remain unregulated and excluded from political debate (Da Roit, González Ferrer and Moreno-Fuentes, 2013). Even if some legal problems have been amended in Austria, imminent problems of this type of care by

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18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2008

2009

2010

2011

2012

2013

Figure 16.3  Development of 24-hour care: number of beneficiaries with public subsidies (2008–2013) Note: Public subsidies for beneficiaries of LTC allowances who employ 24-hour carers are means-tested; in total, about 45,000 active personal assistants are registered with the Austrian Chamber of Commerce, working for about 22,000 people with LTC needs. Sources: BMASK (2014a); Schmidt et al. (2015).

migrant personal assistants remain unsolved, in particular the social impact in sending countries, issues of social security protection and the quality of care.

Developing integrated long-term care systems: a long way to go Organizing and financing long-term care at the interfaces between formal and informal care, and between health and social care, is a complex task that most welfare states have only started to address by means of still fragmented and often uncoordinated measures implemented in a reactive way, rather than through proactive strategies responding to demographic aging and the predictably rising demand (Leichsenring et al., 2013). The legal and organizational framework of health and social services in Austria is still characterized by the fact that health and social services are strictly divided concerning legislation, competencies and financing. Whereas health care and its financing are subject to the logic of social health insurance (Ministry of Health, self-governing management of sickness funds), social care and long-term care are in the competence of the provincial governments – once more, with different departments for health and social affairs – and the Ministry of Social Affairs and Consumer Protection. A large variety of regional laws lead to differing regulations in social care among the Austrian provinces. For example, residential care homes as well as education for staff in these homes are part of the social services and thus legislated by the provinces, while hospitals and the education of nurses are subject to basic regulation by federal laws. Decentralization thus is an inherent issue to the Austrian division of competences based on the principle

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of subsidiarity, but not always linked with positive experiences when it comes to reforms and coordinated action. In practice this leads to very restricted cooperation between hospitals responsible for the acute treatment of a patient and providers of necessary follow-up treatments and long-term care services (rehabilitation, home care, residential care). Functioning links and satisfactory forms of cooperation are often based on informal arrangements between institutions or on personal relationships, for example between a general practitioner and the director of a nursing home, or between hospital staff and the provider of home care. The involved actors in this field – federal government, regions, health and social service organizations, municipalities, health insurances – have been aware of this dilemma for quite a long time, and a number of efforts have been made to improve the situation by means of different model projects of integrated or at least coordinated health and social care. One lesson to be learned from these projects aimed at improving health and social care is that social service providers have learned to work together and keep the logic of competition in the background. In the meantime, many hospitals have nurses trained as discharge managers, but the medical specialization still influences the organization and quality of discharge. In the future, additional efforts will have to be undertaken to systematically improve the interplay between health and long-term care systems. Unfortunately, health care reforms and reforms in the long-term care sector are still largely discussed at separate tables. While an intermediate solution has been established for funding long-term care services and facilities by installing a “long-term care fund” at the federal level, major reforms have been postponed. While strategic goals of health reform include a number of issues concerning coordination and comprehensiveness, related measures remain confined to the existing health care system. And while reforms in the education of social care workers have started to include health competencies, the latest reforms in the education system for nurses are likely to marginalize these efforts to better adapt to the long-term care needs of people living at home and in different residential care settings. Further improvements in the long-term care system are thus expected to be realized in small steps only. This includes the expansion of information and communication technologies (ICT) and their applications to better organize and support the various stakeholders involved, quality development and measures to recruit and retain the workforce that is necessary to maintain and improve care services for people in need of long-term care.

Current and future trends of the Austrian welfare state system When Austria joined the European Union in 1995, its welfare system had already been highly developed so that no major efforts had to be made to adopt EU regulations. The accession and the ensuing endeavors to meet the criteria for joining the eurozone, however, put constant pressure on public expenditures and consequently also on social spending (Tálos and Badelt, 1999). This resulted in major debates about better targeting of individual provisions, some deregulation on the labor market and rising efforts with the aim to combine social support with labor market activation by means of socio-economic enterprises and the subsidization of (outplacement) foundations to promote apprenticeship and/or to overcome problems connected to deindustrialization in specific industries and regions. While the aggregate public social expenditures as a percentage of GDP remained relatively stable – between 1995 and 2013 it grew from 28.6 to 29.8 percent of GDP (BMASK/ESSOSS, 2014) – the Austrian Bismarckian welfare state model has slowly moved to a more hybrid model with new elements beyond social insurance and the subsidiarity principle. This adaptation 270

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process was due to the success of the welfare state that in turn created new challenges with a more balanced labor market participation of both genders, the shift from being a country with “guest-workers” to a multicultural society with a share of more than 10 percent of inhabitants with a migration background, and a rapidly aging population in the context of economic crisis and general cuts in public spending. Up till now, the Austrian welfare state has proven as relatively resilient to the crisis, but a number of challenges remain to be further adapted. New social risks are occurring in particular as a combination of multiple factors such as low qualification, lone parenthood, disabilities and/or a migration background. More proactive strategies to reach these hard-to-reach groups of society will have to be developed to further combat social exclusion processes, particularly with a view to the aging migrant population. The aging of society and a potential increase in poverty, above all in combination with longterm care needs at higher age, will call for new types of local solidarities and respective support beyond purely familistic solutions. This entails further reduction of means-testing, in particular to disentangle long-term care service delivery from social assistance rationales. Furthermore, first initiatives towards intergenerational housing, community animation and time-banking are showing ways towards social innovation that will need new types of public policy support (Schulmann et al., 2014). Austrian welfare expenditures are characterized by a relatively high proportion of cash benefits (Fuchs et al., 2012). Although important improvements have been made in the area of childcare and long-term care, further investments will be needed to improve the social service infrastructure that in fact is able to often produce higher returns than cash benefits alone (Schober et al., 2012). In this respect it will also be necessary to ensure the necessary workforce across all welfare sectors both in quantitative and in qualitative terms. It will be a major challenge in future decades to recruit and retain appropriately trained staff who are able to implement preventative services in a context of rising complexity.

Summary and conclusions This brief overview outlined some basic traits of the Austrian welfare state with a special focus on policy approaches to address long-term care as a social risk. This adaptation of social welfare policies to new societal challenges has taken shape by maintaining the pathway of a Bismarcktype welfare regime with a strong tradition of subsidiarity and corporatist social insurance with its characteristics of entitlements and funding based on employment. However, the past two decades in the context of globalization and Europeanization have been marked by the introduction of new types of measures and schemes that have moved the Austrian welfare regime towards a more hybrid model. This has been evidenced by additional benefits in kind (childcare services, long-term care services, active labor market policy) and a long-term care scheme that has blurred the boundaries of social assistance and social insurance both in its type of funding and in the way it has been implemented. The sustainability of the Austrian model of welfare has often been questioned, in particular as its funding is almost entirely dependent on economic growth and contributions from wages, and private insurance, for example as a second and third pillar in pension insurance, has only played a very marginal role. As both wages and general taxes seem to have reached a level that may hardly be further increased, new ways of funding will certainly be searched for. At the same time further efforts will have to be made to reduce bureaucracy and make better use of information and communication technology towards a “smarter” welfare state beyond existing silos. 271

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Notes 1 Effective pension age increases to 62.8 for men and 59.2 for women, if disability pensions, which however are the main reason for early retirement, are not being considered. 2 The assessment base is calculated with 1.78 percent of the annual income (up to a threshold of about €60,000). 3 In addition, another 4.6 percent of the population is exposed to the threat of severe deprivation. 4 In Austria, contrary to the German Hartz-Reform provincial social assistance offices have not yet been merged with employment offices. 5 The number of beneficiaries has constantly increased from about 316,000 beneficiaries in 1995 to 451,159 by the end of 2013 (BMASK, 2014a).

References Badelt, C.; Holzmann-Jenkins, A.; Matul, C., and Österle, A. (1997), Analyse der Auswirkungen des Pflegevorsorgesystems, Forschungsbericht im Auftrag des Bundesministeriums für Arbeit, Gesundheit und Soziales, BMAGS: Vienna. Bergmann, N., Riesenfelder, A. and Sorger, C. (2012), Auswirkung der Einführung der Bedarfsorientierten Mindestsicherung auf die Wiedereingliederung der LeistungsbezieherInnen ins Erwerbsleben. Endbericht. L&R Sozialforschung: Wien. BMASK, Austrian Ministry of Labor, Social Affairs and Consumer Protection (2013), Österreichischer Pflegevorsorgebericht 2012, BMASK:Vienna. ——— (2014a), Österreichischer Pflegevorsorgebericht 2013, BMASK:Vienna. ——— (2014b), http://www.sozialministerium.at. Bundesministerium für Arbeit, Soziales und Konsumentenschutz / Statistik Austria (2014) ESSOSS (Europäisches System der Integrierten Sozialschutzstatistik) Datenbank, Stand: 31.10.2014. BMASK/ Statistik Austria: Wien, http://www.statistik.at/web_de/statistiken/menschen_und_gesellschaft/soziales/sozi alschutz_nach_eu_konzept/index.html Da Roit, B.; González Ferrer, A., and Moreno-Fuentes, F. J. (2013),The Southern European Migrant-Based Care Model, European Societies,Vol. 15, No. 4, pp. 577–596. Evers, A.; Leichsenring, K., and Pruckner, B. (1994), Payments for Care: The Case of Austria, in A. Evers, M. Pijl, and C. Ungerson (eds.), Payments for Care: A Comparative Overview, Avebury: Aldershot. Fuchs, M.; Leichsenring, K.; Marin, B.; Ruppe, G., and Vanhuysse, P. (2012), Wirkungsweisen und Effekte von Geldleistungen und Sachleistungen im Sozialbereich, City of Vienna: Vienna. Geisberger, T. and Knittler, K. (2010), Niedriglöhne und atypische Beschäftigung in Österreich, Statistische Nachrichten,Vol. 36, No. 6, pp. 448–461. Hammer, E. and Österle, A. (2006), Care Allowances and the Formalization of Care Arrangements, in C. Ungerson and S.Yeandle (eds.), Cash for Care in Developed Welfare States, Palgrave Macmillan: Basingstoke. Hofmarcher, M. and Quentin,W. (2013), Austria: Health System Review, Health Systems in Transition,Vol.  15, No. 7, pp. 1–291. HVSV, Hauptverband der Österreichischen Sozialversicherungsträger (2014), https://www.sozialversicherung.at. Knell, M.; Köhler-Töglhofer,W., and Prammer, D. (2006), Jüngste Pensionsreformen in Österreich und ihre Auswirkungen auf fiskalische Nachhaltigkeit und Pensionsleistungen, Geldpolitik  & Wirtschaft, No. 2, pp. 72–100. Leichsenring, K.; Barnett, S., and Rodrigues, R. (2011), Contracting for Quality, European Social Network/ ESN: Brighton. Leichsenring, K.; Billings, J., and Nies, H. (eds.) (2013), Long-Term Care in Europe – Improving Policy and Practice, Palgrave Macmillan: Basingstoke. Marin, B. (2013), Welfare in an Idle Society? Reinventing Retirement, Work, Wealth, Health, and Welfare, Ashgate: Farnham. Obinger, H. and Tálos, E. (2006), Sozialstaat Österreich zwischen Kontinuität und Umbau,VS Verlag für Sozialwissenschaften: Wiesbaden, Germany. OECD (2005) Long-Term Care for Older People. OECD Publications: Paris.

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——— (2013), OECD Health Statistics, http://www.oecd.org/els/health-systems/health-data.htm. ——— (2014), Social Expenditure Update, http://www.oecd.org/social/expenditure.htm. ÖKSA, Österreichisches Komitee für Soziale Arbeit (ed.), Evaluierung zur Umsetzung der Bedarfsorientierten Mindestsicherung, ÖKSA:Vienna. Österle, A. and Bauer, G. (2012), Home Care in Austria: The Interplay of Family Orientation, Cash-forCare and Migrant Care, Health and Social Care in the Community,Vol. 20, No. 3, pp. 265–273. Pochobradsky, E.; Bergmann, F.; Brix-Samoylenko, H.; Erfkamp, H., and Laub, R. (2005), Situation pflegender Angehöriger, ÖBIG:Vienna. Rodrigues, R.; Huber, M., and Lamura, G. (eds.) (2012), Facts and Figures on Healthy Ageing and Long-Term Care – Europe and North America, European Centre for Social Welfare Policy and Research:Vienna. Rodrigues, R.; Lamura, G., and Huber, M. (2012), Long-Term Care for Older People: Facts and Figures, European Centre for Social Welfare Policy and Research:Vienna. Schmidt, A. E.; Winkelmann, J.; Rodrigues, R., and Leichsenring, K. (2015), Lessons for Regulating Informal Markets and Implications for Quality Assurance – The Case of Migrant Carers in Austria, Ageing & Society, March, pp. 1–23. Schober, C.; Schober, D.; Peric´, N., and Pervan, E. (2012), Studiezum gesellschaftlichen und ökonomischen Nutzen der Mobilen Pflege- und Betreuungsdienste in Wien mittels einer SROI-Analyse, University of Economics and Business Administration,Vienna. Schulmann, K.; Leichsenring, K., Casanova, G., Ciuca˘,V., Corches¸, L., Ghenta, M., Grigaliu¯niene˙, Z., Kucsera, C., Matei, A., Määttänen, N., Naegele, G., Paat-Ahi, G., Pîrciog, S., Principi, A., Rodrigues, L., Rodrigues, R., Sa˘nduleasa, B., Schulze, S., Reichert, M., Szeman, Z., and Wall, K. (2014), Social Support and Long-Term Care in EU Care Regimes: Framework Conditions and Initiatives of Social Innovation in an Active Ageing Perspective, MOPACT Report 8.1, European Centre for Social Welfare Policy and Research: Vienna, http://mopact.group.shef.ac.uk/wp-content/uploads/2013/10/D8.1-Social-supportoverview-report.pdf. Stanzl, P. and Pratscher, K. (2012), Bedarfsorientierte Mindestsicherung – Was Nun? in Österreichisches Komitee für Soziale Arbeit (ed.), Evaluierung zur Umsetzung der Bedarfsorientierten Mindestsicherung, ÖKSA:Vienna. Tálos, E. (1982), Staatliche Sozialpolitik in Österreich,Verlag für Gesellschaftskritik:Vienna. Tálos, E. and Badelt, C. (1999),The Welfare State Between New Stimuli and New Pressures: Austrian Social Policy and the EU, Journal of European Social Policy,Vol. 9, No. 4: 351–361.

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17 The Swiss welfare state system With special reference to education policy Jean-Michel Bonvin and Stephan Dahmen

Social policies in Switzerland are characterized by their high complexity in at least three respects: the intervention of a plurality of actors in a multilevel federalist system marked by the presence of multiple veto points, the importance of corporate and private actors, and the late emergence and unequal significance of social policies in various fields of social policies. The first dimension points to policy processes based on the constant search for consensual solutions, striving to integrate all stakeholders in the decision making process in order to avoid possible referenda at a later stage. This feature offers not only local policy makers at cantonal or municipal level, but also social partners or other lobbies, a powerful say in the making of social (and other public) policies. This also translates to a division of labour between the different levels of government in the line of executive federalism, each one being in charge of specific policy fields (e.g. social insurances at federal level, social assistance at cantonal or municipal level), which risks resulting in a high fragmentation of the Swiss landscape of social policies. These two features – search for consensus (and the ensuing existence of veto points when policies are designed1) on the one hand and subsidiarity and the difficulty to organize cooperation centrally on the other (when policies are implemented) – also account for the fact that Switzerland is often presented as a latecomer in the field of social policies. The second dimension relates to the coexistence of private and public stakeholders within Swiss social policies. For instance, the first pension funds were organized mainly by private companies which resisted against the setting up of public schemes due to their fear of being deprived of this important instrument for their industrial and human resource strategies (Leimgruber, 2008).Therefore the adoption of a social insurance in the field of pensions had to accommodate with the claims of private companies.The same applies for health insurance, where private companies are still playing a central part nowadays; hence the system of social insurance introduced in the mid-1990s had to integrate these actors, and all attempts at setting up a unique public health insurance have failed until now, mainly due to the opposition of powerful private lobbies emphasizing the necessity to maintain competition and freedom to choose in this domain. This results in a multi-actor system, where public actors have to find ways of cooperating with private and corporate actors. Switzerland is indeed a case of a highly complex welfare mix. This has a significant impact in a context where liberal ideas emphasizing labour market flexibility and the non-interference of the state in market processes tend to prevail. 274

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The third feature clearly derives from the first two. As a matter of fact, these complex, multilevel and multi-actor policy processes often resulted in lengthy decision making processes, which delayed the adoption of new social policies or reforms at the central level. For instance, the adoption of the federal constitutional article on pension policy in 1925 was followed by the introduction of a public pension scheme more than 20 years later. Or the integration of an article related to the maternity insurance in the federal constitution in 1946 resulted in the adoption of a law implementing this insurance not earlier than 2005. The necessity to find a consensus, not only with local (cantonal and municipal) actors, but also with private and corporate interests, clearly contributes to prolonging the decision making processes in order to protect decisions against possible referenda. This implies that some actors receive a significant veto power (Bonoli, 2007), which long consultation procedures strive to circumvent. These three features did not impede the adoption of wide-ranging and rather generous social policies in favor of old and disabled people, but they certainly delayed the adoption of similar provisions in the field of unemployment and family policies, where the introduction of federal social insurances took place very late when compared with other countries (1984 for the unemployment insurance, 2005 for the maternity insurance and 2007 for harmonized family benefits at federal level). Actually, the Swiss welfare system has proved its ability to pragmatically react to external pressures or difficult economic circumstances, but it is less prone to adopting proactively path-breaking social policies.This feature is reinforced by the strong emphasis put on budget equilibrium, which has governed all reform processes from the 1990s on.

Major characteristics of the Swiss welfare state system Over the last decades, the Swiss welfare state system has had to face similar challenges as other European welfare states: the aging of the population; the flexibilization and post-industrialization of the labour market; increasing economic pressures due to the globalization of the economy, but also to the strength of the Swiss Franc, which is a source of concern for companies operating on international markets; and transformations in the structure of the family unit. All these changes translated into a significant increase of the caseload of the Swiss welfare system. Indeed, the increasingly competitive functioning of the economy and the labour market coincided with an augmentation in the number of benefit recipients in the unemployment and disability insurances, as well as in social assistance programs. The aging of the population implied the augmentation of the dependency ratio (inactive and economically dependent people vs. workingage population). Besides, the male breadwinner model, on which the Swiss welfare system was premised, was not appropriate to tackle the consequences of the transformed structure of the family unit, as the increase in lone motherhood poverty demonstrated. In Switzerland, like in many other European countries, three directions were explored in order to tackle these issues: cost containment, activation or recommodification of welfare recipients, modernization of the welfare system in order to depart from the traditional breadwinner model and create benefit entitlements in favor of those families not following this pattern. The specific features of the Swiss welfare system described in the introduction clearly influenced the solutions devised to implement these directions, as the necessity to find “modernizing compromises” (Bonoli and Häuserman, 2011) in order to get political majorities is inescapable in the Swiss context. Thus, functionalist explanations insisting on the role of problem pressure combine with interpretations emphasizing political factors, such as institutional features (mainly direct democracy and federalism) and the variety of represented interests (local stakeholders, private actors, etc.), to explain the evolution of the Swiss welfare state. Hence, the preferred strategy was to devise “packages” that could be supported by all stakeholders within the Swiss welfare system, although 275

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for different reasons. The next paragraphs briefly recall the main features of the Swiss welfare system and its recent evolutions in the field of pension, health, unemployment, disability and social assistance, and family policies. The Swiss pension scheme is reputed for its multi-pillar structure that is often presented as a kind of ideal division of risks between a pay-as-you-go universal basic public pension scheme (the first pillar called the AHV/AVS, adopted in 1947), an occupational mandatory fully funded scheme (the second pillar or the BVG/LPP, implemented in 1985) and tax-incentivized private pension savings (the third pillar). The first pillar serves a rather modest pension (about 40% of the average wage) and is the main source of income for many pensioners. It is characterized by a high level of redistribution as contributions are not capped (they are paid for the whole range of wages, whatever their level) and the difference between minimal and maximal pension benefits is low (1 to 2). Besides, it is complemented, on request, for those who cannot rely on adequate pension revenues by means-tested supplementary benefits (EL/PC). The second pillar is managed by a great number of (semi)private pension funds and insurance companies.Together with the first pillar, it aims at guaranteeing about 70 percent of the last wage received before pension. However, the level of pension benefits paid in the second pillar is strictly related to that of contributions, which means that, due to insufficient contribution records, discontinuous professional careers are significantly disadvantaged in this system based on the principle of capitalization. Besides, the second pillar is characterized by a low level of redistribution, as one’s contributions, augmented by their interests over the whole contribution period, represent one’s pensions in the end. The third pillar allows tax-free contributions up to a certain amount, but it plays a minor role as it concerns only a small part of the income of pensioners in Switzerland.The distribution of the Swiss population along the three pillars (about 2.2 million first pillar recipients, against 1.1 million for the second pillar and barely 300,000 for the third one in 2014 – see Figure 17.1

2 1.8

AVS/AHV/AVS

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0.2 0

1925 1941 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Figure 17.1 Persons receiving first-pillar and second-pillar benefits, 1925–2010 (in millions) Source: HSSS (2015).

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for the evolution of this distribution) implies that the system is compatible with the persistence of strong inequalities between pensioners. The three-pillar system resulted from compromises between the interests of various stakeholders: while left-wing parties ambitioned to create a public pension scheme with the objective to find a public overall solution to the issue of old-age poverty, Swiss companies and private insurances wanted to maintain the corporate pension funds that they could use as investment tools and ways to keep their manpower. The coexistence of these interests resulted in the complex threepillar system: a basic public scheme, mandatory occupational plans that are implemented through pension institutions registered in the official Register of Occupational Benefit Plans, and private savings encouraged via fiscal incentives.Thus, this scheme derives more from the necessity to find consensual solutions and accommodate the expectations of all stakeholders than from the ambition to design an ideal solution aiming at distributing risks in a balanced way (Leimgruber, 2008). Over the last decades, the system was challenged in two main respects: first, the aging of the population and the ensuing increasing dependency ratio, which calls for reforming the funding mechanisms of the three pillars; and second, the necessity to take into account the family transformations, especially the consequences of the increasing divorce rate in a context of longer life expectancy for women, and guarantee everyone entitlement to adequate pension benefits. This paved the way for so-called modernizing compromises including new and better conditions in certain respects (splitting of contributions between the two members of a couple while living together, granting of an education contribution for the period spent outside the labour market for childcare reasons, etc.) and more restrictive conditions, in a cost containment logic, in other cases (increase of the retirement age for women, decrease of guaranteed benefits in the second pillar, etc.). Challenges ahead include the persistence of a high poverty rate among Swiss pensioners (16.4% according to a 2014 OFS report against 7.7% for the whole population (OFS, 2014) – it should be noted, however, that these figures do not take into account fortune), especially due to rising health expenses incurred by the oldest part of the population, as well as the concern for the financial sustainability of the system in a context characterized by a significant aging of the population (Figure 17.2). 18 LPP/BVG/LPP 1985

16 14

AVS/AHV/AVS 1947

12 %

10 8 6 4 2 0

1900 1910 1920 1930 1941 1950 1960 1970 1980 1990 2000 2010

Figure 17.2 Percentage of 65+ in the whole population (1900–2010) Source: HSSS (2015).

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Proposals for reforms build on the three-pillar system, with the ambition to both consolidate the financial sustainability of the system and maintain an adequate level of benefits; envisaged measures include the flexibilization of the retirement age and a further decrease of the second pillar benefits (though for later generations). The Swiss health system is considered both as high performing against international standards, which is reflected in the high satisfaction of patients, and rather costly, with expenditure amounting to 11.4 percent of GDP against the OECD average of 9.5 percent (OECD, 2011). It relies on a mandatory health insurance that bears the originality of being halfway between social and private insurance. It includes some features of social insurance, such as compulsory affiliation for all Swiss residents and guaranteed access to, and coverage of the costs of, essential medical treatment (from ambulatory care to hospital care) and pharmaceutical services. Insurers are indeed required to offer the services related to the basic insurance2 to everyone, regardless of age or health status. At the same time, it also integrates many dimensions inspired by the logic of private insurances. For instance, the basic health insurance is managed by private companies, thus leaving the insured people the possibility to choose between a wide range of insurers. This freedom of choice also applies to health providers. Furthermore, people who want to get additional services may contract so-called complementary health insurance on a private basis. Both services – basic and complementary – are managed by the same companies, which blurs the frontiers between the two. Insurers are not allowed to get profits off the basic insurance, but this does not apply for the complementary insurance. Hence health insurers can be characterized as both social and private insurances. As mentioned earlier, the insured people have the possibility to choose their health insurance and to change it at the end of every year. Because benefits and services are the same in the basic insurance, competition mainly relies on the quality and speed of services provided. To access those services, people pay an individual premium, that is all members of one and the same family pay their own premium. This fee varies significantly along specific health insurances and cantons (Figure 17.3), with the residents of the most expensive cantons paying nearly double of the premium in the cheapest ones. It also varies along categories of individuals.3 Monthly premium (in CHF) 650 600 550 500 450 400 350 300 250 200

ZH BE LU UR SZ OWNW GL ZG FR SO BS BL SH AR AI SG GR AG TG TI VD VS NE GE JU CH

Figure 17.3 Distribution of health insurance premiums paid for adults over 25, by canton of affiliation (2011) Lecture: In the canton of Zurich, 5 percent of adult insurees pay less than CHF 322 per month for health insurance, 50 percent of insurees pay less than CHF 361 and 5 percent pay more than CHF 441. Source: OECD (2011: 65).

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Low-income people get subsidies, the total of which amount to about one-fifth of all premiums paid on a yearly basis. The principle is that the insured person should pay the insurance premium for the basic plan up to 8 percent of her personal income. If a premium is higher, cash subsidies should be paid to cover any additional amount. However these subsidies are calculated on a cantonal basis, which makes for significant variations between cantons. This principle of so-called managed competition (Enthoven, 1993) was introduced in 1994 with reference to the Dutch model. The idea is that competition between health providers does not work properly (due among other things to asymmetries of information on behalf of consumers), therefore other ways to promote competition must be mobilized: the strategy is to push consumers to choose their health insurance, thereby putting all insurance companies in competition; then the insurers will pass this competitive pressure on to health providers, for instance through so-called managed care practices such as the setting up of physicians’ networks, health maintenance organizations (HMOs) or preferred provider organizations (PPOs). Hence, the postulate is that a successful “managed competition” between insurance companies, boosted by the insured people themselves, will result in “managed care” practices, in which companies reverberate the competitive pressure on health providers, aiming at efficient cost containment, at the same time guaranteeing good quality health services while avoiding the production of excessive and too costly quality. Despite a recent increase in the number of people choosing these options (and their related reduced premiums), these two principles of competition do not work as efficiently as anticipated and the costs of health insurance have constantly increased after the introduction of the new system following the passing of the federal health insurance law in 1994. Another driver (or supposedly so) of cost containment within the Swiss health insurance derives from the fact that the insured person pays a part of the cost of treatment herself, be it as deductibles or as participation to the expenses. This is meant to promote individual responsibility and reduce moral hazard supposed to be connected with the principle of social insurance. This however results in a policy of risk selection adopted by many insurers, which undermines the foundations for social solidarity in the field of health insurance. A key challenge for the Swiss health insurance is therefore to find ways to combine cost containment and social justice, that is solidarity between the different insurers, cantons and categories of people (young and old, bad risks and good risks). This is difficult to implement in a system based on the principles of “managed competition” and “managed care,” which seems to be conducive to high fragmentation despite compulsory affiliation and the guaranteed provision of uniform basic services. To avoid this, three main cleavages need to be overcome: (1) between citizens-patients who are against the limitation of health supply and citizens-insured who would welcome the reduction of fees; (2) between left-wing parties keen on public regulation and social solidarity, and right-wing parties favorable to competition, privatization and individual responsibility; and (3) between insurers who want to efficiently contain costs, and doctors and pharmaceutical industries who strive to keep high prices and substantial profits (Bolgiani et al., 2006, Boschetti et al., 2006). All these actors are part of the political debate, some with strong lobbying power in Parliament (mainly insurers and industries), others less powerful in deliberative arenas, but still able to successfully mobilize veto points. In the fields of unemployment (AC), disability (AI) and social assistance (AS), although at different paces and intensities, a similar trend towards activation and contractualization of benefits took place (Bonvin and Moachon, 2007). From the mid-1990s on, all three programs introduced activation strategies to counterbalance the negative incentives stemming from long-term and quasi-unconditional benefit payments.To a large extent, this evolution was justified by an important growth of the caseload: the unemployment rate rose from 0.5 percent 279

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in 1990 to 4.7 percent in 1994 and the number of disability pensions more than doubled in almost 15 years, with a peak of 492,221 pensioners in 2006.4 In this context, “passive” expenses, as they were labeled, were sharply criticized due to the dependency trap they were accused of inducing and their supposed failure in reintegrating the beneficiaries into the labour market. This led to a progressive diminution of the amount and duration of cash benefits, together with a hardening of the eligibility conditions and an introduction of behavioral conditions in order to maintain benefit entitlements. At the same time, recommodification of recipients was increasingly seen as the best way to achieve social integration, and active labour market programs were more and more resorted to. Thus, the AC, AI and AS legislations underwent several reforms over the last 15–20 years in order to implement programs paying an increasing attention to professional reinsertion through activation measures, as the level of expenditure devoted to active measures reveals (between 1990 and 2013, so-called active expenses increased from €129 to €593.5 million in the AI and from €16.1 to €544.7 million in the AC, with a peak of €649.8 million in 2005 (OFAS, 2014). In social assistance programs, the same evolution can be observed with the progressive introduction, in many Swiss cantons, of active labour market policies from 1995 on. New managerial techniques and tools were introduced in all three programs in order to monitor the action of local welfare agents, thus putting an important focus on performance indicators, benchmarking, provision agreements, protocols and the like, with a view to influencing and shaping their practices. All these moves progressively turned social policies in the fields of unemployment, disability and social assistance into social integration policies, the ultimate objective of which is to make the welfare system more effective by activating all categories of recipients, exploiting more fully their capacity for work and limiting public expenses via the reduction of the caseload. The issue of the quality of professional reintegration has however received less attention, as the tendency is to consider that a low-quality job, for example one with a low remuneration or an unfavorable timetable, is better than no job at all. Despite these common trends, the evolution towards activation and contractualization took rather diverse shapes in the three programs under review. While the unemployment insurance (AC) was a pioneer in endorsing a more resolute line of activation from the mid-1990s, including a significant use of sanctions against the recipients not complying with institutional expectations, the invalidity insurance and the social assistance schemes turned to activation at a later stage and with more flexible tools. The use of sanctions is considered with more reluctance by social workers and local agents of the disability insurance, thus making it more difficult to implement a tough line of activation. Overall, the AC privileges short-term programs focused on the enhancement of marketability towards employers (e.g. learning how to write an attractive CV or application letter; basic education in math, languages or computers, etc.), and the use of constraints when necessary in order to promote quick re-integration, while the AI and the AS develop longer-term measures, encompassing more dimensions of the human life (health for the AI, family, debts, housing, etc. in the AS case), with a lesser tendency to resort to sanctions (see Bonvin and Rosenstein, 2015, for a detailed presentation of these differences). The Swiss field of activation is also characterized by a high fragmentation between the programs, which results in so-called roundabout or revolving door effects. As a matter of fact, all reforms in the federal insurances that aim at restricting benefit entitlement – with a view to containing costs and avoiding dependency traps – tend to transfer costs to local social assistance programs. At the same time, cantons and municipalities strive to design active programs that reopen entitlement periods to the benefits provided by federal insurances. Hence, fragmentation together with the managerial requirement of cost containment that can be observed in all three

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programs often translates into a shifting of responsibility between the three programs, which penalizes benefit recipients in the end. Switzerland is often presented as a laggard in the field of family policies (Thoenen, 2010). However, from the beginning of the 2000s and after a series of failures to pass legislation related to family policies, significant developments have taken place such as the adoption of the maternity insurance and a parental leave scheme (60 years after the adoption of the constitutional article related to this matter), a strong impulsion towards the setting up of childcare services, and the introduction of a federal law harmonizing the level of family benefits (while the differences between cantons before the introduction of this law used to be as important as those between social-democratic countries and liberal countries in Europe (Bonoli and Häuserman, 2011). More precisely, Switzerland adopted in 2005 a maternity insurance that included the entitlement to a replacement income at the level of 80 percent for a period of 14 weeks after birth. In 2003, the federal Parliament adopted a policy of subsidizing childcare infrastructure, which led to the creation of numerous care places. By 2015, 47,000 new places were created, an increase of about 90 percent. These figures are still far from matching the demand in care places, which can be explained by the tendency to shift the responsibility for funding childcare infrastructure between the federal, cantonal and municipal levels (similar to the “revolving door” effect observed in the field of activation, Bonoli and Häuserman, 2011). Provisions were also made at cantonal level to introduce all-day class schedules. Finally, the harmonization of family benefits for all children also illustrates the ambition of the federal level to intervene in the field of family policies. These evolutions mark a clear departure from the previous period where such policies were virtually non-existent in Switzerland as they were considered as a prerogative of cantons, which made for huge differences between Catholic cantons and more secularized ones. The quasi-absence of family policies in Switzerland was usually accounted for by institutional factors (direct democracy, federalism, veto points, which prevented the adoption of farreaching and path-breaking reforms (Bonoli, 2007) and by the weight of conservative interests in the Swiss political landscape (predominance of right-wing parties and conservative ideas, considering the family as a private matter and responsibility). The evolutions mentioned earlier imply a different situation that was interpreted in various ways. Some insist on the convergence of interests between a modernizing left and a liberal right in favor of policies improving the reconciliation between work and care activities, while at the same time emphasizing the coincidental nature of this convergence of interests, that could well disappear if circumstances change. For these authors, the trend towards more ambitious family policies is very fragile and could well be reversed in the future (Ballestri and Bonoli, 2003). By contrast, others underline the ideational foundation of the new policies that take their roots in the emergence of new values oriented towards gender equality and the necessity to support families in order to prevent the transmission and reproduction of poverty via intergenerational mechanisms (Kübler, 2007). An intermediary interpretation sheds light on the many possible frames underlying the new family policies, which can be envisaged as (1) programs favoring the female employment market, (2) tools of social justice in order to combat family poverty or (3) measures promoting gender equality (Häuserman and Kübler, 2010). Specific policies may be classified at the intersection of such frames, thus accounting for the setting up of coalitions in favor of their adoption. In this way, it is the ambivalence of family policies, at the crossroad of various frames, that may explain their being supported by policy coalitions crossing over left/right divides. Whatever the explanations for this striking evolution in the field of Swiss family policies, it must be emphasized that Switzerland remains a laggard in this respect, as indeed its progress was made at a slower pace than its European counterparts during the last decade.

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Special focus: education policy Switzerland is widely known for its high-quality vocational training system (Rauner, 2008; Hoeckel et al., 2009), that is often touted for its innovative capacity (Gonon, 2009) and, due to high involvement by employers, its capacity to adapt to changing conditions on the labour market (Steedman, 2010). The Swiss dual-VET system is “dual” in several respects. First, two-thirds of each cohort follow firm-based training programs accompanied by a school-based component (1–2 days per week) in which apprentices acquire upper secondary general education in core subjects and theoretical knowledge in their training occupation. Second, this duality of the school and the firm as learning places is accompanied by a shared governance structure by public and private actors. Firms and professional organizations define the firm-based training and the content of the apprenticeships, while the federal state regulates exams and the standardization of training regulations, and the cantonal public actors are responsible for implementation and governance of vocational schools. Switzerland’s comparatively low youth unemployment rates are often credited to this dual system that has received much international attention (Chatzichristou et al., 2014). It represents thus a good example of an education policy that is often associated with low supply-demand mismatch, low youth unemployment rates, and that is – particularly in the context of youth employment policies – increasingly described as a role model to follow for other European welfare states (BMBF, 2012; EC, 2012). In comparative research on educational systems, Switzerland figures, along with Austria, Germany and Denmark, as a collectivist skill formation system within a coordinated market economy (Iversen and Stephens, 2008; Rohrer and Trampusch, 2011; Busemeyer and Trampusch, 2011). Coordinated market economies are characterized by strong vocational training institutions and a generous welfare state that encourages individual investments in occupational skills. Such vocational training regimes imply a high involvement of employers and employers’ associations in the administration and financing of training and the provision of portable, certified occupational skills (Thelen and Busemeyer, 2008: 7). This means that skills are transferable within the same sector and mostly lead to occupations protected by collective wage agreements. This in turn corresponds to an economy characterized by diversified quality production (Iversen and Stephens, 2008) and by a strong bargaining power of business interest organizations in the process of educational policy formulation.5 The Swiss educational system, just like the Swiss welfare state, is characterized by a complex governance structure in a federalized political system. This is due to the high degree of organizational decentralization, the principle of subsidiarity and the specificities of policy making in a direct-democratic system. Legislative power in the field of education and training is distributed between cantons, the confederation and other stakeholders, notably inter-cantonal organizations (e.g. the EDK, the conference of cantonal directorates of education) and (private) professional organizations. On the one hand, lower secondary education is principally under cantonal jurisdiction (there is no education department at the federal level). In 2006 a new article on education was introduced in the Swiss constitution, allowing federal authorities to enact regulations on compulsory schooling (i.e. until the age of 16). This process has been termed a “silent” reform of Swiss federalism (Fischer et al., 2010), as the devolution of additional competencies to the federal level is rarely observed in most policy fields. Until now, it has had very limited direct impact, although it certainly contributed to boost recent initiatives, taken at inter-cantonal level, to harmonize the different cantonal obligatory school systems. On the other hand, responsibility for upper secondary education is shared between the confederation, the cantons and professional organizations (social partners, trade associations as well as VET providers). Since 2002, 282

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Switzerland disposes of a new federal vocational training law that assigns clear tasks to the federal actors. The relevant actor on the federal level is the state secretariat for education, research and innovation (SERI), belonging to the federal department of economic affairs.

The organization of upper secondary education Upper secondary education can be roughly differentiated according to two tracks: First, vocational education and training programs, provided within the dual system, lasts between 2 and 4 years and leads to a federal diploma (3–4 years) or a federal certificate (2 years) of vocational education and training in one of the approximately 230 recognized crafts. Second, upper secondary education programs (gymnasiums) lead to a matura-diploma (baccalaureate) that grants access to tertiary university tracks. The successful completion of the federal VET diploma enables apprentices to start skilled work and, after some years of professional experience, enter higher vocational training in professional, non-academic higher education institutions (Stalder and Nägele, 2011). For certain crafts, there is also the possibility, after the completion of the federal VET diploma, to get a professional baccalaureate that grants access to applied universities. Hence, bridges have been introduced between the tracks of VET and higher education during the last 10–15 years. This permeability, although still limited, constitutes a specificity of the Swiss skill regime; similar regulations do not exist for instance in Germany (Rohrer and Trampusch, 2011). In the school year 2012/2013, the baccalaureate track made up for 89,000 pupils, while the dual VET system accounted for 230,000 pupils, i.e. more than 70 percent of the cohort (BFS, 2014). Access to upper secondary school programs is dependent on school results, on individual choice as well as opportunities and restrictions in the apprenticeship market. In order to access an apprenticeship position, an apprenticeship contract with a firm is required. This ensures a short-term balance between supply and demand in a trained workforce. However, as demand and supply are left to the forces of the market, mismatches are possible. This was the case in the mid-1990s, when the Swiss economy was facing a recession.The contraction in the manufacturing sector, the decline in firms’ provision of apprenticeships and the growing demand of training places due to demographic factors led to a situation where many young people could not enter upper secondary training (Strahm, 2008; Gonon and Maurer, 2011). This situation in turn led to the quantitative extension of so-called bridging offers for young people who could not enter an apprenticeship. About 20 percent of all youngsters and 40 percent of the pupils from tracks with “basic” demands are enrolled in such programs. While nowadays the apprenticeship market seems to be at an equilibrium (which means that the overall number of applicants and the number of vacant apprenticeships are roughly equal), there is still a mismatch between the vocational aspirations of youngsters and the places offered by the occupational sectors which train apprentices. For instance, many apprenticeship places in the manual, lower-qualified segments remain vacant (SBFI, 2014). At the same time, the state secretariat for economic affairs warns against skill shortages in specific sectors, especially in the so-called MINT professions (mathematics, computer science, science and technology) and in social and health professions (BSS, 2014). Despite all efforts, a relatively low but constant number of youngsters remains without an apprenticeship.

Inequities and unequal access in the Swiss educational system The Swiss lower secondary education system is highly segmented and selective (Vellacott and Wolter, 2004; Fuentes, 2011). The 2000 PISA results showed that Switzerland is part of that 283

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group of OECD countries in which the parental occupational status has the strongest effect on the literacy scores of youngsters. Additionally, the difference between the performance of native and first generation immigrants is one of the highest in the OECD (Fuentes, 2011: 7), proving the relative inability of the Swiss obligatory school system to compensate for unequal starting conditions. Fuentes also showed that around 20 percent of the school population did not reach the competence level 2 in reading skills.This is certainly due to the early selection implemented in the Swiss educational system. After primary school (ISCED 1), pupils are channeled into different educational tracks (ISCED 2). Most cantons differentiate between so-called basic (leading to vocational training) and extended (leading to higher education) tracks. The defenders of early differentiation generally argue that the different educational tracks correspond to children’s different abilities, performance capacities, and aspirations, and that early differentiation is effective in preparing children for the various types of work and sectors in the labour market. Furthermore, it is sometimes argued that early tracking and a segmented secondary school system, characterized by limited possibilities to change tracks later on, may be functional for the vocational training system, insofar as “the firms’ willingness to invest in training hinges on the assurance that graduate apprentices remain with the training firm and do not wander off to higher education instead” (Busemeyer and Nikolai, 2010: 501). Nevertheless, empirical results show that early tracking is a central factor for explaining the intergenerational transmission of inequalities (Bauer and Riphahn, 2006). In the same line, research on employers’ recruitment decisions (Imdorf, 2007) shows that lower-educated youngsters display negative signals that are sorted out from the beginning of the job application process. This impacts considerably on their future career possibilities. As a matter of fact, the negative consequences of early selection in the Swiss educational system have been abundantly documented. This led youth organizations and trade unions to initiate a popular referendum in 1998 with a view to guaranteeing that all school leavers were provided the right to vocational education (Sigerist, 2008). While this initiative was strongly rejected by most employers’ organization and the confederation, it nevertheless led to the insertion of an article in the Vocational and Professional Education and Training Act adopted some years later, stating that the confederation “strive(s) to ensure that there is an adequate number of VET and PET programmes” (art 13 VPETA). Furthermore, the VPETA introduced the possibility to create binding sectoral training funds (art 60), to which firms not providing apprenticeship places have to pay contributions. The level of state intervention in Switzerland is low when compared to other VET countries. As Meyer puts it, “market economy driven ‘vocationalisation’ is at its maximum here” (Meyer, 2009: 29). In Denmark, every private and public firm has to pay contributions into a nationwide training fund (Arbejdsgivernes Elevrefusion, or AER), whether it provides training or not. Austria has developed state-governed, full-time school-based VET tracks (Ebner and Nikolai, 2010), the so-called training guarantee.This amounts to a guaranteed paid apprenticeship for all youngsters, a feature often touted as an example to follow by the European youth guarantee initiative (EC, 2012: 6). Switzerland, in contrast, has a much lower level of state intervention, and private enterprise has an essential say in all main features of the VET system. Policy initiatives to raise the rate of upper secondary graduates to 95 percent have been put forward (EDK and EVD, 2011). Indeed, enhancing access to upper secondary education is widely envisaged as a silver bullet for reducing later welfare expenditure (CSIAS/SKOS, 2007) and increasingly, scholars point to the social costs of being without upper secondary education (Fritschi and Oesch, 2009). Due to the limited role of federal actors, the measures to enhance 284

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participation rates in upper secondary education are restricted to developing and better coordinating the different support systems and “bridging offers,” together with providing guidance counseling.They also include a stronger activation of young social assistance and unemployment benefit recipients, in line with the trends observed earlier. Supply-side adaptability is clearly privileged at the expenses of demand-side interventions.

Challenges and recent developments As described earlier, central challenges relate to equity concerns within the Swiss lower- and upper-secondary education system and the possible negative effects of economic recession on the provision of apprenticeship places. On the supply side, shrinking cohorts of school leavers and a sharpened competition between VET and academic education may lead to an overall decrease of the VET share. On the demand side, structural change in the Swiss economy, and more particularly tertiarization (Strahm, 2008), may lead to a decline of the engagement of firms for vocational training. The continuity of the Swiss VET arrangement strongly depends on the involvement of small and medium enterprises which are largely overrepresented in the provision of training. In comparison, larger international companies, mostly active in the service and finance sector, do more seldom provide apprenticeships themselves and resort to a lesser degree to apprentices for the recruitment of their own workforce. Another challenge is the risk of skills mismatch. As most apprenticeships provide sector-specific occupational skills, cross-sector mobility of apprentices is less likely, the transition to a post-industrial economy may require other skills than what an often craft-based apprenticeship can provide. It is also important to note that since the 2000s, compared to university graduates and older skilled workers, career entrants with VET qualifications have a higher risk of unemployment (Salvisberg and Sacchi, 2014: 255). Within the public discussion on the Swiss educational system, there is a controversy between those who want to promote more general, academic education through enhancing tertiary education and those who strive to maintain the dual VET system and adapt it to the changing skill requirements of a post-industrial knowledge economy.

Current and future trends of the Swiss welfare state system In the near and midterm future, Swiss social policies will be confronted with three main challenges. First, the preservation of the decommodification function of the welfare state in a context of cost containment and retrenchment will not be an easy task. In Switzerland, this function has been implemented along the “male breadwinner” model, which requires deep-seated adaptations due to the present wide-ranging transformations and diversification of the family unit. This model was based on a gender division of labour that is increasingly at odds with the reality of the labour market. Two evolutions need to be taken into account: the growing significance of the female labour force, which also calls for the defamilialization of childcare and elder care in order to facilitate the work-family reconciliation, and the growing proportion of non-standard employment contracts (part-time, fixed-term, temporary, etc.) that results in an increasing discontinuity of professional careers. Under such circumstances, a new basis must be found for social security contributions, as the unfragmented occupational career cannot be considered anymore as the standard to be fulfilled in order to open entitlement to cash benefits or to other services of the welfare state. The issue at stake is how to preserve universal entitlement at an appropriate level while guaranteeing the financial sustainability of the welfare state. This applies to all fields of 285

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social policies: in pension policies, the challenge is to preserve universal access to adequate benefits, which requires developing solutions for people with insufficient contribution records in the second pillar; in health policies, to maintain universal access to high-quality health care while striving for efficiency and cost containment; in unemployment, disability and social assistance policies, to guarantee an adequate level of benefits while still making work pay; in family policies, to promote the reconciliation between work and family activities while keeping a politically acceptable level of expenditure. All in all, this first challenge requires fulfilling expanding social needs and at the same time containing the increase of social expenditure resulting from the aging of the population, the rising costs of medical services and the growing uncertainty of individual life courses in the present context (deregulation of the labour market, de-standardization of life courses, etc.). In the Swiss context, two main proposals compete in the public debate: (1) reduce benefits in their amount and duration and (2) reorient social expenses in the direction of social investment (i.e. transform social policies into active expenses, promoting activation and autonomy, rather than subsidizing passive consumption). Both proposals could however undermine the basis of social solidarity as the first one calls for the dismantlement of the welfare state, while the second focuses on active expenses at the detriment of decommodification expenses presented as passive. Second, social policies are increasingly oriented towards the promotion of financial independence, that is the possibility for benefit recipients to regain autonomy from the welfare state and live independently from state support. This mainly takes place through the setting up of activation strategies aiming at putting people back to work. A key issue will be to find paths for reforms that are based on the complementarity between decommodification measures and activation strategies. Indeed, if activation relies on the reduction of benefit levels (in order to make work pay), it risks pushing people to accept any kind of jobs in order to escape the conditions provided by poor-quality welfare benefits and services. In other words, low-quality autonomy or financial independence (e.g. through poor-quality jobs) could well be the outcome of low-level decommodification programs. The twin issues of the quality of activation measures (not pushing people back to work at any cost, but enhancing human capital and human development at large) and the quality of jobs (not any job, but a fulfilling job) are crucial in this respect. If these issues are not adequately taken into account, especially in unemployment, disability and social assistance policies, then social policies would lose sight of their main objective and pursue financial sustainability rather than the improvement of the citizens’ quality of life. With regard to this second challenge, the issue of defamilialization is also key. Indeed, as in the EU member states, the current objective is not only to put unemployed, disabled people and social assistance recipients back to work, but also to increase the female labour force participation. For this reason, the work-care conciliation policy is increasingly taking significance in the Swiss welfare state, which calls for the further creation of adequate infrastructure in the fields of childcare and elder care. Switzerland still lags behind in these respects. Third, the Swiss welfare state faces to the highest degree the challenges of federalism and subsidiarity. In such a context, not only the federal level is allowed to intervene only in cases where cantons and communes cannot properly tackle issues, but also the public sector has to accommodate with other actors such as private insurances, companies, non-governmental organizations (NGOs) and the family. Two issues deserve special mention. First, the risk of fragmentation within social policies in times of budgetary restraint threatens the cohesion of the different components of the welfare state, and favors corporatist practices and shifting responsibilities between these levels, at the expense of common and transversal solutions. The trends

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towards privatization and localization of welfare (transferring costs onto families and social assistance programs) are observable in many fields. In such cases, the means of social policies (especially equilibrated public budget) risks passing before their goals of supporting the wellbeing and agency of beneficiaries. Second, private actors play an important role in Swiss social policies and this role will be increasing in the coming years, notably in the fields of activation, childcare and elder care. Also companies are increasingly called to collaborate in order to facilitate the professional reintegration of benefit recipients. Such an involvement cannot be taken for granted, and governance tools are to be designed in order to guarantee that private interests can be turned into tools acting for the common good.

Summary and conclusions All in all, the Swiss welfare system offers quite generous benefits and high-quality services against international standards, except in the field of family policies where Switzerland is often presented as a poor achiever.6 Main institutional features of the Swiss welfare arrangement (the multiplicity of stakeholders and veto points, the role of direct democracy and federalism) lead to a comparatively low welfare state expansion during the post-war period, and explain the slow pace of change. As we have shown, the development of nearly all policy fields within the Swiss welfare state is characterized by late and incremental change rather than major paradigmatic changes (Hall, 1993). In the Swiss context, such path-breaking transformations take place, if at all, only via the addition of subsequent incremental reforms. Seen from a distance, the Swiss welfare state evolved from a residual welfare state to a “continental welfare state with a liberal face” (Armingeon, 2001), a development that was delayed but not stopped by its institutional structure. The path of incrementalism, caused by the presence of the specific institutional factors mentioned in the introduction, implies a risk of incoherence between the various components of the welfare system and is not conducive to bolder, more systemic reforms. How will the Swiss welfare state adapt to the manifold challenges that it is exposed to nowadays? While the surrounding European welfare states are facing, in the wake of the European crisis, increasing reform pressures leading to a general trend of welfare state retrenchment, it remains unclear what course of reform the Swiss welfare system will take.The pressures the Swiss welfare state is facing are manifold: the strong Swiss franc, putting pressure on wages and employment rates, as well as the approval of immigration quotas by the Swiss electorate (in February 2014), leading to the need to increasingly resort to the resident labour force, will have indirect and direct effects on welfare policy fields. On the level of governance, there are indications for both an increasing centralization of competences on the federal level (education and VET policies, the developments in the field of family policies) together with an increasing devolution of costs and responsibilities on to the local level (cost containment in social insurances that result in transfer costs to social assistance mechanisms). On the level of the policy ideas, one can observe a slow but steady trickle-down effect of policy discourses of supra-national actors (e.g. social investment policies), and this despite the fact that Switzerland is not a member of the European Union. All in all, if Switzerland has proven its capacity to incrementally adjust its welfare system to external pressures and to find consensual solutions among diverging interests, it remains unclear whether it would be equally able to adopt truly path-breaking and innovative social policies that may be needed during the present time, especially in the field of activation and family policies.

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Notes 1 The adoption of a constitutional article is necessary to authorize the confederation to intervene in a specific field. This implies a two-step procedure, first changing the constitution, then designing new policies. This provides two potential veto points to opponents. 2 These are defined in official regulations, which exclude e.g. dental treatment and private ward hospitalization. 3 For instance, young people under 18 pay a lower premium. 4 The figures for social assistance are available only from 2004 at federal level. From that time on, no significant increase could be observed. However, the data available at cantonal level indicate an increase in the caseload throughout the 1990s. 5 By contrast, liberal regimes of skill formation like the US are characterized by the provision of general skills through higher education and by highly deregulated labour markets. This rather corresponds to a production model putting emphasis on mass production and radical product innovation. 6 See e.g. http://www.sgi-network.org/2014/Switzerland/Social_Policies, where Swiss family support policies are considered as insufficiently developed.

References Armingeon, K. (2001), Institutionalising the Swiss Welfare State, West European Politics, Vol. 24, No. 2, pp. 145–168. Ballestri, Y. and Bonoli, G. (2003), L’Etat Social Suisse Face aux Nouveaux Risques Sociaux, Genèse et Déterminants de l’Adoption du Programme d’Impulsion pour les Structures de Garde pour Enfants en Bas Âge, Revue Suisse de Science Politique,Vol. 9, No. 3, pp. 35–58. Bauer, P. and Riphahn, R. T. (2006), Timing of School Tracking as a Determinant of Intergenerational Transmission of Education, Economics Letters,Vol. 91, No. 1, pp. 90–97. BFS (Bundesamt für Statistik) (2014), Sekundarstufe II: Allgemein- und Berufsbildung, http://www.bfs. admin.ch/bfs/portal. BMBF (German Federal Ministry for education and Research) (2012),Vocational Education and Training in Europe – Perspectives for the Young Generation, Memorandum on Cooperation in Vocational Education and Training in Europe Berlin, 10–11 December 2012, http://www.bmbf.de/pubRD. Bolgiani, I.; Crivelli, L., and Domenighetti, G. (2006), Le Rôle de l’Assurance Maladie dans la Régulation du Système de Santé en Suisse, Revue Française d’Affaires Sociales,Vol. 2, No. 2–3, pp. 239–262. Bonoli, G. (2007), Social Policies, in U. Klöti, P. Knoepfel, H. Kriesi, W. Linder,Y. Papadopoulos and P. Sciarini (eds.), Handbook of Swiss Politics, NZZ Verlag: Zurich, Switzerland, pp. 763–783. Bonoli, G. and Häuserman, S. (2011), Swiss Welfare Reforms in a Comparative European Perspective: Between Retrenchment and Activation, in C. Trampusch and A. Mach (eds.), Switzerland in Europe: Continuity and Change in the Swiss Political Economy, Routledge: London. Bonvin, J.-M. and Moachon, E. (2007), The Impact of Contractualism in Social Policies: The Case of Active Labour Market Policies in Switzerland, International Journal of Sociology and Social Policy, Vol.  27, No. 9–10, pp. 401–412. Bonvin, J.-M. and Rosenstein, E. (2015), Contractualising Social Policies: A Way Towards More Active Social Citizenship and Enhanced Capabilities? in R. Ervik, N. Kildal, and E. Nilssen (eds.), New Contractualism in European Welfare Policies, Ashgate: Aldershot. Boschetti, P.; Gobet, P.; Hunkeler, J., and Muheim, G. (2006), Le Prix des Médicaments, L’Industrie Pharmaceutique Suisse, Editions d’En Bas: Lausanne. BSS, Volkswirtschaftliche Beratung AG (2014), Fachkräftemangel in der Schweiz – Ein Indikatorensystem zur Beurteilungder Fachkräftenachfrage in Verschiedenen Berufsfeldern, Studie im Auftrag des Staatssekretariats für Wirtschaft (SECO), Basel, Switzerland. Busemeyer, M. R. and Nikolai, R. (2010), Education, in F. G. Castles, S. Leibfried, J. Lewis, H. Obinger, and C. Pierson (eds.), The Oxford Handbook of the Welfare State, Oxford University Press: Oxford. Busemeyer, M. R. and Trampusch, C. (2011), The Comparative Political Economy of Collective Skill Formation, in M. R. Busemeyer and C. Trampusch (eds.), The Political Economy of Collective Skill Formation, Oxford University Press: Oxford. 288

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Chatzichristou, S.; Ulicna, D.; Murphy, I., and Curth, A. (2014), Dual Education: A Bridge over Troubled Waters? Study Commissioned by the European Parliament, DG for Internal Policies, Policy Department B: Structural and Cohesion Policies Culture and Education, http://www.europarl.europa.eu/meetdocs. CSIAS/SKOS (2007), Ausbildungs- und Arbeitslosigkeit bei Jungen Erwachsenen. Anregungen zu einer Integrierten Strategie zur Bekämpfung des Armutsrisikos bei Jungen Erwachsenen, Position Paper, CSIAS/SKOS: Bern. Ebner, C. and Nikolai, R. (2010), Duale oder Schulische Berufsausbildung? Entwicklungen und Weichenstellungen in Deutschland, Österreich und der Schweiz, Swiss Political Science Review, Vol. 16, No. 4, pp. 617–648. EC, European Commission (2012), Commission Staff Working Document: Accompanying the document Proposal for a Council Recommendation on Establishing a Youth Guarantee http://eur-lex.europa.eu. Enthoven, A. C. (1993), Managed Competition: History and Principles, Health Affairs, Vol. 12 Supplement 1, pp. 24–48. EVD/EDK (2011), Chancen Optimal Nutzen, Erklärung 2011 zu den Gemeinsamen Bildungspolitischen Zielen für den Bildungsraum Schweiz, Eidgenössisches Volkswirtschaftsdepartement und Schweizerische Konferenz der kantonalen Erziehungsdirektoren, Bern. Federal Act on Vocational and Professional Education and Training (2015), Vocational and Professional Education and Training Act, VPETA, of December 13, 2002, https://www.admin.ch/ch/e/rs/c412_10. html. Fischer, M.; Sciarini, P., and Traber, D. (2010), The Silent Reform of Swiss Federalism: The new Constitutional Articles on Education, Swiss Political Science Review,Vol. 16, No. 4, pp. 747–771. Fritschi, T. and Oesch, T. (2009), Gesellschaftliche Kosten der Ausbildungslosigkeit in der Schweiz: Schlussbericht, Büro für Arbeits- und Sozialpolitische Studien: Bern. Fuentes, A. (2011), Raising Education Outcomes in Switzerland, Economics Department Working Papers, No. 838, OECD: Paris. Gonon, P. (2009), The Internationalization of Vocational Education Reform-Concepts: A Rhetorical Perspective, in A. Heikkinen and K. Kraus (eds.), Reworking Vocational Education – Policies, Practices and Concepts, Bern: Peter Lang, pp. 63–76. Gonon, P. and Maurer, M. (2011), Educational Policy Actors as Stakeholders in the Development of the Collective Skill System: The Case of Switzerland, in M. Busemeyer and C. Trampusch (eds.), The Political Economy of Collective Skill Formation, Oxford University Press: Oxford. Hall, P. (1993), Policy Paradigms, Social Learning, and the State: The Case of Economic Policymaking in Britain, Comparative Politics,Vol. 25, No. 3, pp. 275–296. Häuserman, S. and Kübler, D. (2010), Policy Frames and Coalition Dynamics in the Recent Reforms of Swiss Family Policy, German Policy Studies,Vol. 6, No. 3, pp. 163–194. Hoeckel, K.; Field, S., and Grubb, W. N. (2009), Learning for Jobs: OECD Reviews of Vocational Education and Training: Switzerland, OECD: Paris. HSSS (2015), Histoire de la Sécurité Sociale en Suisse, http://www.histoiredelasecuritesociale.ch/fileadmin/ redaktion/Zahlen/G5.jpg. Imdorf, C. (2007), Individuelle oder Organisationale Ressourcen als Determinanten des Bildungserfolgs? Organisatorischer Problemlösungsbedarf als Motor Sozialer Ungleichheit, Swiss Journal of Sociology, Vol. 33, No. 3, pp. 407–423. Iversen,T. and Stephens, J. D. (2008), Partisan Politics, the Welfare State, and Three Worlds of Human Capital Formation, Comparative Political Studies,Vol. 41, No. 4–5, pp. 600–637. Kübler, D. (2007), Understanding the Recent Expansion of Swiss Family Policy:An Idea-Centred Approach, Journal of Social Policy,Vol. 36, No. 2, pp. 217–237. Leimgruber, M. (2008), Solidarity Without the State? Cambridge University Press, Cambridge. Meyer, T. (2009), Can “Vocationalisation” of Education Go Too Far? The Case of Switzerland, European Journal of Vocational Training,Vol. 46, No. 1, pp. 28–40. OECD (2011), OECD Reviews of Health Systems: Switzerland, OECD: Paris. OFAS (2014), Statistiques des Assurances Sociales Suisses 2014, OFAS: Bern. OFS (2014), La Pauvreté des Personnes Âgées, OFS: Neuchâtel. 289

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Rauner, F. (2008), Steuerung der Beruflichen Bildung im Internationalen Vergleich, Bertelsmann Stiftung: Gütersloh, Germany. Rohrer, L. and Trampusch, C. (2011), Continuity and Change in the Swiss Vocational Training System, in C. Trampusch and A. Mach (eds.), Switzerland in Europe, Europe in Switzerland. Continuity and Change in the Swiss Political Economy, Routledge: London. Salvisberg, A. and Sacchi, S. (2014), Labour Market Prospects of Swiss Career Entrants after Completion of Vocational Education and Training, European Societies,Vol. 16, No. 2, pp. 255–274. SBFI (2014), Lehrstellenbarometer April 2014: Situation Stabil, press release, http://www.sbfi.admin.ch. Sigerist, P. (2008), Berufsbildung Zwischen Wirtschafts- und Lemforderung, in T. Bauder and F. Osterwalder (eds.), 75 Jahre Eidgenössisches Berufebitdungsgesetz, Bep-Verlag: Bern. Stalder, B. E. and Nägele, C. (2011),Vocational Education and Training in Switzerland: Organisation, Development and Challenges for the Future, in M. M. Bergman, S. Hupka-Brunner, A. Keller, T. Meyer, and B. E. Stalder (eds.), Transitionen im Jugendalter: Ergebnisse der Schweizer Längsschnittstudie TREE, Seismo: Zürich, Switzerland. Steedman, H. (2012), Overview of Apprenticeship Systems and Issues, ILO Contribution to the G20 Task Force on Employment, ILO: Geneva, Switzerland. Strahm, R. (2008), Die Entscheidenden 90er Jahre: Das Ringen um Reform und Aufwertung der Berufsbildung 1995–2005, in T. Bauder and F. Osterwalder (eds.), 75 Jahre Eidgenössisches Berufebitdungsgesetz, Bep-Verlag: Bern. Thelen, C. and Busemeyer, M. R. (2008), From Collectivism Towards Segmentalism Institutional Change in German Vocational Training, MPIfG Discussion Paper, No. 08/13, Max Planck Institute for the Study of Societies, Cologne, Germany. Thoenen, O. (2010), Reconciliation of Work and Family Life in Switzerland, German Policy Studies,Vol. 6, No. 3, pp. 13–48. Vellacott, M. C. and Wolter, S. (2004), Equity in the Swiss Education System: Dimensions, Causes and Policy Responses National Report from Switzerland, Contributing to the OECD’s Review of “Equity in Education,” OECD: Paris.

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18 The Russian welfare state system With special reference to regional inequality Markus Kainu, Meri Kulmala, Jouko Nikula and Markku Kivinen

Russia’s transition from a socialist system to a market economy resulted in an exceptionally dramatic social crisis. Increases in poverty, inequality and mortality are its indicators. In the center of the so-called post-socialist welfare crisis is the severe demographic crisis that Russia has been facing: a low birth rate combined with a low life expectancy – especially of Russian men, which reached as low as 57 years in 1994 – led to unequaled depopulation of 700,000 people per year at its worst.This is a far more severe population decline than in any other industrialized country in peacetime. Such an explosion of well-being problems has been accompanied by the simultaneous demolition of the previously state-led welfare system. Since the Soviet Union collapsed, Russian welfare underwent large processes of liberalization, privatization and decentralization in the 1990s, which often produced badly implemented reforms (Cook, 2007). A shift back to a more interventionist role for the Russian federal state in welfare policy took place in the 2000s, during President Putin’s second term, when social policy was promoted as one of the government’s top priorities at all governmental levels (Cook, 2011; Kulmala, 2013), precisely because of the alarming demographic situation. A closer scrutiny of this statist turn, however, shows that the shift concerns almost exclusively family policy, with a special focus on augmenting the birth rate (Kulmala et al., 2014). Thus, paradoxically, the most pressing problem of working-age male mortality, rooted in men’s unhealthy lifestyles, has been responded to by encouraging women to have more babies (  Jäppinen et al., 2011; Kulmala et al., 2014). Recent analyses indeed show that the family policy measures have been somewhat effective: the birth rate has increased.When it comes to the other side of the demography coin, the life expectancy of Russian men has not improved significantly.This contrast emphasizes the incoherence of Russian welfare policy and its incapability of addressing the key problem of high male mortality. In this article, our empirical analysis focuses on the welfare outcome concerning these two fundamental questions, births and deaths, especially from the regional viewpoint. Russia is a gigantic country. For the sake of its sheer size – the great distances and differences between different parts of the country – an emphasis on the territorial division of a country as a determinant of social inequality is highly relevant. Furthermore, Russia is a federal state and the federal 291

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subjects, that is the regions of Russia, carry the main responsibility for formulating and implementing social policies, whereas the federal state answers for only general and national standards in health and social policies.Therefore we can treat federal subjects not only as different in terms of inequality outcomes, but also as functional regions when it comes to acting in social policy. Through a regional-level investigation, we can assess the possibility of regional and social policy to influence the more equal welfare outcome across the country. Societal inequalities have always been a core interest of social policy research. In general, the discipline has been interested in social determinants of inequality and the redistributive impact of social policies in leveling those inequalities. However, the spatial dimension has been most often addressed by either studying a single country or doing comparative research on the scale of nation states. In addition to comparative cross-national studies there is a strong body of literature on spatial inequalities at city level. What lies in between is the so-called regional or territorial level of inequalities, which has gained a lot less attention. As Lobao et al. (2008: 90) write, the “spatial scale is important because it defines the territorial resolution by which processes creating inequality work out and the arena for targeting policy and political action.” In this chapter, we concentrate on how well-being differs on the basis of regional averages. In other words, we leave interpersonal inequality and inequality between social groups aside. We first discuss the major developments in the Russian welfare regime since the collapse of the socialist system and then paint a picture of major welfare-related problems in contemporary Russia. Thereafter, we address the regional dimension of inequality through investigation of developments in life expectancy and fertility rates.Then we debate the current and future trends and draw our conclusions.

Major characteristics of the Russian welfare state system The collapse of the Soviet Union marked a wide reorganization of welfare provision.The socialist welfare system was the so-called state-paternalist model, based on 100 percent state control of planning and financing and with no role for the market or third sector in welfare provision.Welfare services were based on the principle of universalism – either free of charge (e.g. health care, education) or strongly subsidized (e.g. housing) services. The Soviet welfare policy was constructed on two pillars: First, the state provided non-monetary social benefits for particular social groups; second, most social benefits and services were work-related and distributed at the stateowned enterprise level. While the system was based on full employment of men and women, it provided wide coverage of services. The Soviet system established those services throughout its region, thus most people had access to them. Social policy was only for marginalized groups.1 Salaries were low, as were differences in income – especially compared to post-Soviet Russia. All in all, basic Soviet welfare was relatively comprehensive and secure, yet determined by the state rather than democratic politics.The leadership felt it necessary to regulate income inequality as well as regional policy towards equality. Differences in wealth were concealed, although not completely. The common argument is that Soviet society displayed a combination of formal egalitarianism, especially towards income policy, but also contained significant aspects of inequality.When Mikhail Gorbachev came to power in the mid-1980s, he began to deconstruct egalitarian policies and introduced reforms that widened income inequality (Wegren, 2014: 3). Soviet society had its shortcomings, but was more equal than contemporary Russia. The collapse of the economy in the late Soviet and early post-Soviet Yeltsin years was disastrous for the lives of the Russian people and for the state’s provision of health and social services. In 1987–1988 and 1993–1995, the number of poor rose from 2.2 million to 74.2 million and the Gini coefficient of income inequality rose from 0.24 to 0.36 (Milanovic´, 1998: 41, 68; 292

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Saarinen, 2012: 231). Since the collapse of the communist regime, Russian welfare structures have undergone constant reform, and the state’s social responsibilities have shifted back and forth among various governmental levels. In the 1990s, radical reforms were necessary in order to prevent the complete collapse of the Russian economy. Under Boris Yeltsin, the priority was relieving pressure on the state budget, and Russia went through a virtually uncontested and non-negotiated welfare state liberalization that has no equivalent in democratic systems. The development did not result in any comprehensive welfare policies, let alone any positive welfare outcome (Cook, 2007). Inequalities grew not only between individuals and social groups, but also between regions. Dolinskaya (2002) explains the rise by inter-regional inequality in industrial specialization. Most regions were highly industrialized, but also highly specialized in one or two industrial sectors. This specialization was desirable under central planning, but proved highly vulnerable for the decentralization and liberalization of foreign trade. Regions rich in natural resources and specializing in producing raw materials were able to make use of the liberalized export markets, whereas regions with manufacturing industry soon found their products were uncompetitive against foreign alternatives. Later, new foreign and domestic investments were largely built in different locations from those where the old ones were shut down. For example, the Kaluga region, favored by foreign car manufacturers, was a winner in this process. After the somewhat chaotic Yeltsin years, the Putin administration has increasingly emphasized welfare questions. During his first term, Putin continued with liberalizing policies that were legislated during a period of strong and sustained economic recovery. As Cook (2007) documents, the Duma, Russia’s national parliament, approved changes in the legislative base across most areas of the welfare state, shifting direction from a decayed statist model towards a more market-conforming one. It reformed the pension system, passed major legislation on housing privatization and deregulation of labor markets, and initiated further marketizing changes in the health and education sectors. As Cook (2007: 27–28) argues, this was, however, not a return to the non-negotiated liberalization of the initial transition period, but a liberalization negotiated within the elite, because social-sector elites and state-based bureaucratic stakeholders retained influence over welfare policies. In the end, however, many major welfare services in contemporary Russia still remain public. The 2006 administrative reform revised the division of powers in social support, health care, and education, which are usually considered the major areas of welfare services (Cook, 2007: 6).Yeltsin’s reforms produced a chronic problem of under-resourced welfare services under the responsibility of the Russian municipalities. Putin moved these obligations almost entirely from the municipal to the regional level.With a few exceptions, the Russian federal state answers only for general policies, principles, and national standards in health and social policies, whereas the regional governments enact regional laws to organize, manage, and finance the relevant services and subsidies. Thus, the main responsibility for the implementation of social policies falls onto the regional governments (Kulmala, 2013: 91–92). One exception to this system is in-kind benefits for a narrow group of beneficiaries, that is for the politically and socially most important categories of military veterans and the disabled, prioritized by the government and thus left under the responsibility of the federal government (Wengle and Rasell, 2008: 744). Other exceptions are social housing and targeted social support, which is usually material assistance for the very poor, which are still municipal responsibilities. As Table 18.1 shows, half of all public education2 is funded by local budgets and most public money for health is channeled via the regional level. Housing is almost not a federal issue at all, while social security expenditure looks overwhelmingly federal, largely due to pensions and in-kind benefits. 293

Markus Kainu et al. Table 18.1 Expenditure for social functions by tier of government as a percentage of total expenditure, 20063

Housing Education Health Social welfare

Federal

Regional

Local

8 22 22 81

49 26 59 14

43 52 19 5

Within the regional government–led system, a shift back to a central state–led welfare policy took place in the 2000s. Especially during President Putin’s second term, social policy was promoted as one of the government’s top priorities at all governmental levels (Cook, 2011; Kulmala, 2013). The poor health of Russians became a national concern, and four projects aimed at improving quality of life were to be conducted: “Health,” “Housing,” “Education,” and “Countryside.” With such programs, the Russian federal state invested the budget surplus into welfare institutions, and thus, as Cook (2011: 14) writes, “began to play a much more activist and interventionist role in social welfare, mounting the National Priority Projects.” These projects, launched in 2005 and implemented during 2007–2012, are national policies at the federal level, whereas responsibility for social policies mostly belongs to the regional governments. The budget surplus emerged thanks to the high price of oil on the international market. Thus, investments into welfare were made possible by significant economic growth. In 2007, Russia’s GDP growth reached 8.1 percent, making it one of the fastest growers among the world’s major economies. Oil and gas exports contributed approximately 15 percent of GDP (60 percent of total exports), leading to a budget surplus that the Kremlin used to stabilize the economy and provide increased social protection for Russia’s citizens. According to Cerami (2009), expenditures for social policy doubled between 2007 and 2010. Welfare benefits for citizens increased substantially and poverty rates declined considerably.This budget surplus grew until the global financial crisis of 2008, which hit Russia hard. However, the Russian government continued its commitment to welfare.4 Pensions were even raised in 2008–2010, despite the global economic crisis. Cerami (2009) calls this oil-led social policy the Russian miracle. However, as we have shown before (Kulmala et al., 2014), the relative shares of most social expenditure categories remain almost the same despite the growing emphasis on social policy. Since 2005, social policy has been a priority and funding has increased accordingly, although not more rapidly than other outlays. Furthermore, the increase in social security has mainly concerned pensions and family and childhood protection. In the crisis year of 2009, the share of social expenditure other than pensions (which, as noted, actually increased) declined rather steeply. All of this seems to lead to the conclusion that, in spite of the increased budgetary resources, the Russian miracle in social policy is overstated. As we have also shown (Kulmala et al., 2014), with further scrutiny of these policies it becomes obvious that the shift concerns only certain prioritized groups, such as (young) families, which are crucial for national interests in the middle of the severe demographic crisis. Starting from the early 2000s, a strong family-centered ideology has characterized governmental policy programs, and a new conservative protection of the family has served as a key task for governmental policies (Rotkirch et al., 2007; Rivkin-Fish, 2010; Chernova, 2013), which define families very narrowly, conservatively and normatively.5 The pro-natalist family policy of the 2000s has unquestionably focused on ethnically Russian, young heterosexual nuclear families 294

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and their (potential) children.6 Chernova (2013) has aptly named this new emphasis the Fifth Priority Project alongside the four official ones. The stress on family values is obviously connected to the severe population decline in Russia. President Putin declared the necessity of governmental support for mothers who had at least two children, and proposed a comprehensive approach to state aid to “young families.” “If the state is genuinely interested in increasing the birthrate, it must support women who decide to have a second child,” he stated in his 2006 address to the nation, thus defining birth rate stimulation as a core element of the new family policy.The essence of these new policies is the so-called maternity capital, whereby women who give birth to a second (or subsequent) child receive a certificate for a substantial amount of money, which is to be spent on purposes predefined by the policy makers (see Borozdina et al., 2014). In addition to the maternity capital, expectant mothers and newborn babies were brought under a free-of-charge care system through “birth certificates,” whereby the federal government compensates for certain services at local women’s clinics. Birth grants and child benefits were also increased.The reform also included increases in parental leave payments and state subsidies for day care – all on a progressive basis. (Kulmala et al., 2014; see also Rivkin-Fish, 2010; Cook, 2011; Chandler, 2013). The basic principle seems to be the more babies, the more money from the government. Addressing the demographic crisis is therefore treated as women’s responsibility (to have more babies), even as the crisis, as noted, is rooted in some men’s unhealthy ways of life (  Jäppinen et al., 2011: 3). As we have argued (Kulmala et al., 2014), the name of the major policy measure in the field is another paradox: “health” would indicate a focus on problems in health, but, in practice, family policy reforms make up most of the program. The government, however, has made some efforts to influence people’s healthier behavior through certain restrictions on the advertising, sale and consumption of tobacco and alcohol (see e.g. Levintova, 2007; Neufeld and Rehm, 2013), but unlike the considerable improvement in infant mortality and growth in birth rates, one can see very little progress in reducing working-age male mortality. In addition to family benefits, pensions have steadily increased. A major increase in the average pension size occurred in 2009 (Tarasenko and Kulmala, 2015: 11). However, it is not clear whether this investment should be treated as an intentional social policy or as an anti-crisis measure, which is how the World Bank and the International Monetary Fund (IMF) usually treat additional pension payments. Regardless, as we have argued (Kulmala et al., 2014), the pension reform seemed to make social expenditures the priority in the crisis period; putting money into military expenditure would have been a more predatory solution. It remains to be seen whether this is sustainable in the long term, with the challenging population structure. The fact that the Russian population is aging rapidly implies a rising dependency ratio, especially because of the low retirement age.7 During the next 20 years, the number of pensioners will increase by 10 million, but the working population will decline by 11 million. By 2020 there will be approximately 800 retired persons for every 1,000 working-age citizens. At his third-term inauguration day, May 7, 2012, President Putin gave a series of socio-political decrees aiming at improving quality of life, which included improvements in public sector salaries and family benefits.The act can be considered an expression of gratitude to the people who voted for him. On the other hand, this populist gesture created a serious financial burden for the regional governments responsible for the salaries in public health care, education, science and culture. In the current crisis, some regional governments have not been able to implement their social responsibilities (Kulmala and Tšernova, 2015). In many fields of welfare arrangements, however, we see the Russian state continuing to withdraw from its previous social obligations, recently by encouraging, for instance, Russian non-governmental organizations (NGOs) and businesses to step into welfare service provision. 295

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The federal government has enacted legislation that enables the state to outsource its social obligations to Russian NGOs, especially those labeled as socially orientated NGOs, which will presumably increase the already dominant social orientation of Russian civil society. The government has also made certain endeavors to reduce taxes on charity activities for businesses, which are thus encouraged, if not expected, to participate in various social programs. In particular, large companies such as Intel, IBM, Citibank, and Coca-Cola are engaged in quite large social programs. Large public charity campaigns have also been conducted to attract citizens and companies to raise money for social welfare issues (see e.g. Kulmala, 2013; Kulmala et al., 2014). As the most recent development, a new law on social service provision came into force in 2015 and opened up wide avenues for entrepreneurship in welfare. Before, it was state and municipal institutions which provided the basic social services regulated by the law, but in the new system, the state defines the national standards and finances the related services, which, however, can be provided by anyone from whom the state now decides (on a call-for-proposals principle) to purchase the services. In sum, despite the aforementioned statist turn with the narrowly selected social policy priority, the government actively seeks new models that are rather neoliberal in their essence. As a result, neither liberalism nor statism serves as a totalizing hegemonic project or defines the overall logic of welfare development in the country. Instead, the system is a complex mix that changes inconsistently and incoherently (Kulmala et al., 2014). The narrative of the Putin-Medvedev era has been that Putin rebuilt the welfare state with rising state revenues. However, the overall picture does not look as promising as one would perhaps assume after such substantial attention.We argue that Russian welfare policy is highly paradoxical. Despite the economic growth, and lots of talk about prioritizing social policy, Russia has not been able to develop a systematic approach to welfare and has not addressed the major welfare challenges. On the other hand, the Putin years have become associated with improvements in well-being in the minds of Russians because many of them have experienced positive changes. This subjective experience, combined with the ever-growing welfare rhetoric at the top of the political agenda, has undoubtedly resulted in the growing legitimacy of the current regime – albeit without a systematic welfare policy or policy making based on democratic interest representation (Kulmala et al., 2014). In Table 18.2, when we look at contemporary Russia in light of the key welfare indicators at the national level, we can see that according to the UNDP Human Development Indicator, Russia is placed in a high human development category at a similar level to the United Arab Emirates or Greece. The GDP per capita of US$11,223 ranks Russia at the World Bank’s bottom high income or top of upper-middle-income category, together with Poland and Brazil, whereas mean wages are level with Estonia’s and Jamaica’s. Although in the Russian context, the Table 18.2  Regional disparities in social development indicators, 20128

Human Development Index Similar GDP per capita Similar

296

Russia

Moscow

Best of regions

Worst of regions

0.843

0.931

0.931 (Moscow)

0.750 (Tyva)

United Arab Emirates Greece 11,223

Norway Australia 29,602

Poland Brazil

Spain Cyprus

43,787 (Tyumen Oblast) France UK

Mexico Kazakhstan 2,630 (Chechnya) Sri Lanka Nigeria

The Russian welfare state system

Russia

Moscow

Best of regions

Worst of regions

Total fertility rate

1.69

1.32

3.35 (Tyva)

Similar

Canada Slovenia 9.1

Poland Spain 6.1

Ukraine Uruguay 64.9 Moldova Philippines 13.1 Somalia Serbia 0.2

US Serbia 75.7 Bahrain Czech Republic 9.6 Uruguay Slovakia 1.7

Zimbabwe Djibouti 4.2 (Tambov Oblast) Poland Belarus 77.8 (Ingushetia) Belgium EU mean 3.5 (Ingushetia) Libya Singapore 17.2 (Ingushetia)

1.22 (Leningrad Oblast) Portugal Macao 21.8 (Chukotka)

Hong Kong Sweden 39.69

Norway Netherlands 24.2

Bangladesh Zimbabwe 16.9 (Ingushetia)

Thailand Burkina Faso 1,215

Sweden Iceland 2,686

Estonia Jamaica

Germany Singapore

Ukraine Slovenia 3,894 (Kamchatka Krai) Luxembourg Norway

Infant mortality Similar Life expectancy Similar Mortality rate Similar Natural population increase Similar Gini index Similar Mean wage (US$) Similar

Suriname Algeria 60.8 (Chukotka) Haiti Sudan 18.4 (Pskov) Afghanistan Swaziland −7.6 (Pskov) Ukraine Bulgaria 45.9 (Tomsk Oblast) Nicaragua Malawi 532 (Ingushetia) Egypt Thailand

national-level indicators reveal only little, as Table 18.2 strikingly illustrates, when we add the regional dimension to this picture, we see a variation that ranges from equivalence to Sweden to equivalence to Sudan, and all that inside Russia.9 Next we focus on regional inequality by investigating the two fundamental questions of welfare in Russia. In econometric and social policy analysis of welfare inequalities, economic assets such as household income, consumption or wealth are often used as proxies for household or individual welfare (e.g. Milanovic´, 2005). Our selection of indicators is specific to Russia’s welfare challenges and regional characteristics. As mentioned earlier, demographic issues have been major concerns of political leaders and therefore the main targets of social policy since 2000. As an indicator for the social and health status of regions we use life expectancy at birth, and to assess the outcomes of the pro-natalist social policies we use total fertility rate. As a proxy for regions’ living standards and economical capacity we use gross regional product (GRP) per capita. On the basis of this analysis, we are able to discuss the prospects of social and regional policy more concretely.

Special focus: regional inequality in the Russian Federation In this section we first look at the inequality between regions through three indicators.Thereafter we construct two typologies between our resource variables and life expectancy and fertility rate and discuss regional inequality in more depth.10 297

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Resources and welfare outcomes Gross regional product The regional differences in Russia have remained more or less the same despite the strong economic growth of the past 15 years. Akhmedjonov et al. (2013) find no evidence of income convergence in Russia over the period 2000–2008. Their results clearly prove that interregional inequality continues in Russia. The Russian regions seem to have vastly different development characteristics, resulting in large income dispersion. Other commentators agree that there is a strong inertia of existing development trends, because “inequality is reproduced geographically through investments, which are concentrated in the regions with oil and gas-extraction and capital agglomeration” (Zubarevich, 2014: 3–4). The winners in regional development have been resource-rich (oil and gas) areas and some larger cities. We can see from the bottom panel of Figure 18.1 that relative differences in gross regional product per capita (GRP) are huge, with oil-rich areas (Tyumen, Chukotka and Sakhalin) together with Moscow greatly surpassing the rest of the regions (see Zubarevich, 2014: 2). The top 10 regions in per capita GRP are oil-rich regions, with the exception of Moscow and St. Petersburg. The top panel presents the total GRP figures: Moscow and Tyumen’s importance is obvious. Zubarevich (2014) explains this by the fact that the largest Russian companies are registered in Moscow. The joint share of the city of Moscow and Tyumen GRPs is 35 percent of the total GDP of Russia. In addition, it is notable that most Russians outside Moscow and Tyumen reside in regions with somewhat similar per capita GRPs. The map in Figure 18.2 illustrates the spatial distribution of GRP per capita and shows clearly that the regions with a higher GRP than the national level GDP are in the Russian North or close to Moscow and St. Petersburg, with the exception of the Krasnodar region on the Black Sea. From Figure 18.2, we can see that roughly 72 percent of the Russian population lives in the regions with lower GRP per capita than the national average.

Life expectancy As a number of studies have shown (e.g. Stuckler et al., 2009), the national average life expectancy collapsed dramatically from 69 years in the early 1990s to 65 years in 2000.The problem is characterized by a wide gender difference: the life expectancy for men fell from almost 64 years in 1990 to 59 in 2000; and of women from 74 to 72. Life expectancy was lowest in 1994: for men 57 years and women 71 (Figure 18.3).The regional differences in life expectancy increased throughout the early 2000s, but in most regions a positive turn began in 2005, with the most significant improvement in the northern and north western regions.The difference between the Russian regions has, however, remained more or less the same.

Fertility rate After a decade of declining fertility rates, positive development started in early 2000s in all Russian regions. If we analyze the development in terms of economic development, the fertility rates have developed most favorably in the northern and far eastern oil- and gas-producing regions, including the Archangelsk region, Komi Republic, Tyumen region and Sakha Republic. Positive development in fertility also occurred in some resource-poor areas such as Altai and Tuva. On the 298

Source: Rosstat (2012).

0

10000

20000

30000

40000

0e+00

1e+11

2e+11

3e+11 Under 830 000

Gross regional product per capita in US$

1.23 million − 2.52 million

Gross regional product in US$

830 000 − 1.23 million

Population (each category consists equal number of regions)

Figure 18.1  Absolute and per capita GRP in regions of Russia in 2012

US$ (in 2012) in year

Kalmykia Tuva Kabardino−Balkaria Karachay−Cherkessia Ivanovo Oblast Dagestan Altai Republic Adygea Altai Krai Stavropol Krai Kirov Oblast Mordovia Kurgan Oblast Pskov Oblast Bryansk Oblast Mari El Buryatia Penza Oblast Chuvashia Oryol Oblast Tambov Oblast Ulyanovsk Oblast Saratov Oblast Rostov Oblast Kostroma Oblast Tver Oblast Vladimir Oblast Tula Oblast Zabaykalsky Krai Smolensk Oblast Astrakhan Oblast Ryazan Oblast Volgograd Oblast Kursk Oblast Jewish Autonomous Oblast Chelyabinsk Oblast Voronezh Oblast Udmurtia Khakassia Novosibirsk Oblast Lipetsk Oblast Republic of Karelia Omsk Oblast Nizhny Novgorod Oblast Yaroslavl Oblast Kemerovo Oblast Novgorod Oblast Krasnodar Krai Kaliningrad Oblast Amur Oblast Bashkortostan Primorsky Krai Kaluga Oblast Samara Oblast Vologda Oblast Irkutsk Oblast Orenburg Oblast Khabarovsk Krai Perm Krai Moscow Oblast Sverdlovsk Oblast Murmansk Oblast Belgorod Oblast Tomsk Oblast Tatarstan Arkhangelsk Oblast Leningrad Oblast Kamchatka Krai Krasnoyarsk Krai Saint Petersburg Magadan Oblast Komi Republic Sakha Republic Moscow Chukotka Autonomous Okrug Sakhalin Oblast Tyumen Oblast

Over 2.52 million

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Republic Kaliningrad of Oblast Saint Karelia Petersburg Murmansk Pskov Oblast Oblast Leningrad Novgorod Arkhangelsk Oblast Oblast Oblast Vologda Oblast Komi Republic

GRP per capita Above national average Below national average

Kamchatka Krai Sakha Republic

Krasnoyarsk Krai

Tyumen Sverdlovsk Oblast Oblast Chelyabinsk Oblast Omsk Tomsk Kurgan Oblast Oblast Oblast Kemerovo Novosibirsk Oblast Altai Oblast Krai Khakassia Altai Republic

Chukotka Autonomous Okrug

Magadan Oblast

Khabarovsk Sakhalin Krai Oblast

Irkutsk Oblast

Tuva

Amur Oblast Zabaykalsky Buryatia Krai Jewish Autonomous Oblast

Primorsky Krai

GRP per capita Above national average Below national average

Kostroma Kirov Yaroslavl Perm Oblast Oblast Oblast Krai Ivanovo Oblast Moscow Mari Udmurtia Vladimir Nizhny Smolensk El Novgorod Oblast Moscow Oblast Tatarstan Oblast Chuvashia Bashkortostan Kaluga Oblast Ryazan Oblast Tula Mordovia Ulyanovsk Bryansk Oblast Oblast Oblast Samara Oryol Oblast Penza Lipetsk Tambov Oblast Oblast Oblast Orenburg Oblast Oblast Oblast Kursk Saratov Voronezh Oblast Belgorod Oblast Oblast Oblast Volgograd Oblast Tver Oblast

Rostov Oblast

Kalmykia

Krasnodar Krai Stavropol Krai Kabardino−Balkaria

Adygea Karachay−Cherkessia

Ingushetia

Astrakhan Oblast Chechnya Dagestan

Figure 18.2  Federal subjects11 of Russia by GRP per capita in 2012 Source: Rosstat (2012).

other hand, these two former areas were among those where life expectancy was low and hardly increased. In most regions, the fertility rate has increased only moderately. In large cities, especially Moscow and St. Petersburg, the rates have remained more or less unchanged. Their lower fertility rates than in other parts of the country are typical for wealthy big cities of the world. 300

Source: Rosstat (2013).

50

60

70

80

Year

1996

2012

2012

Gender

Female

Figure 18.3  Life expectancy at birth in Russian regions in 1996 and 2012

Years

1996

Tuva Chukotka Autonomous Okrug Magadan Oblast Jewish Autonomous Oblast Sakhalin Oblast Altai Republic Kemerovo Oblast Khakassia Zabaykalsky Krai Kamchatka Krai Irkutsk Oblast Amur Oblast Komi Republic Sakha Republic Buryatia Primorsky Krai Pskov Oblast Krasnoyarsk Krai Khabarovsk Krai Novgorod Oblast Republic of Karelia Perm Krai Tomsk Oblast Arkhangelsk Oblast Tver Oblast Murmansk Oblast Chechnya Ivanovo Oblast Sverdlovsk Oblast Tula Oblast Tyumen Oblast Leningrad Oblast Vologda Oblast Kostroma Oblast Altai Krai Smolensk Oblast Moscow Oblast Kaliningrad Oblast Udmurtia Novosibirsk Oblast Ryazan Oblast Yaroslavl Oblast Kurgan Oblast Samara Oblast Chelyabinsk Oblast Kursk Oblast Vladimir Oblast Kaluga Oblast Orenburg Oblast Kirov Oblast Nizhny Novgorod Oblast Astrakhan Oblast Kalmykia Saratov Oblast Tambov Oblast Oryol Oblast Rostov Oblast Bryansk Oblast Omsk Oblast Mari El Krasnodar Krai Bashkortostan North Ossetia...Alania Lipetsk Oblast Chuvashia Volgograd Oblast Penza Oblast Stavropol Krai Voronezh Oblast Adygea Ulyanovsk Oblast Mordovia Tatarstan Moscow Saint Petersburg Belgorod Oblast Kabardino−Balkaria Ingushetia Karachay−Cherkessia Dagestan

Male

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Typology of regions To assess the degree of the demographic challenges and economic capacity to meet these welfare challenges, we created a simple typology by dividing each of the variables in two at the point of the national average presented in Table 18.3. Regions with GRP per capita less than US$11,223 per year were classified as resource poor and wealthier-than-average regions as resource rich. Regions with a life expectancy exceeding the average of 70.24 years were labeled healthy and the regions with lower than average life expectancy as less healthy. Regions with fertility rates higher than the average of 1.69 were labeled fertile and those with lower than the average as less fertile. With each variable split in half, we combined the two outcome variables with our capacity variable of GRP per capita and ended up with cross-tabulation of four categories regarding both outcome variables (Figure 18.5). For life expectancy, regions were classified into (1) resource rich and healthy, (2) resource rich and less healthy, (3) resource poor and healthy and (4) resource poor and less healthy. For fertility rate, regions were classified into (1) resource rich and fertile, (2) resource rich and less fertile, (3) resource poor and fertile and (4) resource poor and less fertile. The results are presented in Figures 18.3 and 18.4, in both of which life expectancy is in the top panel and fertility rate in the bottom panel. In Figure 18.5, the size of the dot reflects the population in the regions, whereas the color of the dot marks whether the gender differences in life expectancy are higher (red) than the national average or lower (blue), illustrating how gender equality in health is linked with our variables of interest. The results regarding life expectancy are clear: there are seven regions that have resources and life expectancy higher than the national average when you look at Figure 18.5. As becomes evident from Figures 18.5 and 18.6, roughly one-fifth of Russia’s population lives in those regions that are “doing well,” whereas almost half (47%) of Russians live in the 44 regions that belong to the resource poor and less healthy regions in our typology. These regions span from the Republic of Karelia in the west all the way through central Russia and Southern Siberia to Primorsky Krai by the Pacific Ocean. These regions share higher than average health problems with lower than average economic capacity. The second largest category in terms of regions (19) and population share (25%) is the resource poor healthy regions, which form an almost connected area stretching from Northern Caucasus to the borders of Tatarstan, where the demographic challenges are lower than average, as is the capacity to solve them. Finally, there is the category of resource rich and less healthy regions, that is those having higher than average resources to tackle the lower than average life expectancy, consisting of 11 regions and 8 percent of the population. These regions mostly cover the north of Russia with its hostile climate.

Table 18.3  Categories of typology and threshold values, national mean in parentheses Life expectancy (70.24 years)

Resources (US$11,223)

High Low

302

Fertility rate (1.69)

High

Low

High

Low

Resource rich & Healthy Resource poor & Healthy

Resource rich & Less healthy Resource poor & Less healthy

Resource rich & fertile Resource poor & fertile

Resource rich & less fertile Resource poor & Less fertile

Population (each category consists equal number of regions) Under 830 000

830 000 − 1.23 million

1.23 million − 2.52 million

Over 2.52 million

Arkhangelsk Oblast 3.47 Tuva 3.35 Komi Republic 3.2 Chechnya 3.08 3

Altai Republic 2.91

Tyumen Oblast 2.58

Sakha Republic 2.17

Dagestan 2.19 2

Buryatia 2.13 Dagestan 2.03

Sakha Republic 1.88 Komi Republic 1.85 Kalmykia 1.82 Altai Republic 1.8 Chechnya 1.67 North Ossetia...Alania 1.62

Smolensk Oblast 1.43

Arkhangelsk Oblast 1.63

Tula Oblast 1.43 Tambov Oblast 1.42 Mordovia 1.32

Yaroslavl Oblast 1.1

Moscow 1.32

Ivanovo Oblast 1.06

Leningrad Oblast 1.22

Moscow Oblast 1.03 Moscow 1.03

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

Saint Petersburg 0.93 1996

1

Leningrad Oblast 1.07

Source: Rosstat (2013).

Ingushetia 2.27

Tuva 2.25

Figure 18.4  Fertility rate in Russian regions in 1996–2012

Fertility rate

Ingushetia 2.3

1.2

1.3

1.4

1.5

1.6

2.0

2.5

3.0

3.5

Altai Republic

Altai Krai

4000

Ivanovo Oblast

Karachay− Cherkessia

Mordovia

6000

Tula Oblast

Oryol Oblast

Tambov Oblast

Penza Oblast

Bryansk Oblast

Tver Oblast Ulyanovsk Oblast

Kostroma Oblast

Chelyabinsk Oblast

Astrakhan Oblast

Jewish Autonomous Oblast

Nizhny Novgorod Oblast

10000

Moscow Oblast

Samar a Oblast

Kaluga Oblast

Primorsky Krai

Leningr ad Oblast

Belgorod Oblast

Tomsk Oblast

15000

Saint Petersburg

Magadan Oblast

Krasnoyarsk Krai

Kamchatka Krai

Murmansk Oblast

Tatarstan

Sakha Republic

Komi Republic

Gross regional product per capita (US$ 2012 − log−scale)

8000

Voronezh Oblast

Volgograd Oblast

Vologda Oblast

Orenbur g Oblast

Perm Krai

Khaba rovsk Krai Novgorod Amur Sverdlovsk OblastOblast Oblast

Kaliningrad Oblast

Yaroslavl Oblast

Smolensk Oblast

Rostov Oblast

Ryazan Oblast

Vladimir Oblast

Lipetsk Oblast

Krasnodar Krai

Republic of Karelia

Kemerovo Oblast

Irkutsk Oblast

Arkhangelsk Oblast

20000

25000

resource rich

Higher than national mean

Gender inequality in life expectancy Lower than national mean

Bashkortostan

Omsk Oblast

9000

Khakassia

Udmurtia Novosibirsk Oblast Kursk Oblast

Saratov Oblast

Zabaykalsky Krai

Chuvashia

Pskov Oblast

Kirov Oblast

Mari El

Kurgan Oblast

Buryatia

Stavropol Krai

Kabar dino− Balkaria Adygea

Kalmykia

Dagestan

North Ossetia...Alania

Tuva

6000

resource poor

3000

Source: Rosstat (2013).

Sakhalin Oblast

30000 35000 40000 45000

Moscow

Chukotka Autonomous Okrug

Tyumen Oblast

less fertile

Figure 18.5 Classification of Russian regions based on GRP per capita and life expectancy and fertility rate (2012)

Fertility rate

Population (thousands)

fertile

62.5

65.0

67.5

70.0

71

72

73

74

75

76

Mor dovia

Adygea

Rostov Oblast

Ulyano vsk Oblast

Tambo v Oblast

Chuvashia

Penza Oblast

Stavropol Krai

North Ossetia...Alania

Astrakhan Oblast

Volgograd Oblast Voronezh Oblast

Krasnodar Krai

9000

Moscow Oblast

4000

Tuva

Ivano vo Oblast

Kirov Oblast

6000

15000

Magadan Oblast

20000

Sakha Republic

Komi Republic

25000

resource rich

Sakhalin Oblast

Tyumen Oblast

30000 35000 40000 45000

Chukotka Autonomous Okrug

Moscow

Higher than national mean

Gross regional product per capita (US$ 2012 − log−scale)

10000

Irkutsk Oblast

Amur Oblast

Keme rovo Oblast

8000

Jewish Autonomous Oblast

Krasnoyarsk Krai

Arkhangelsk Oblast

Leningr ad Oblast

Kamchatka Krai

Murmansk Oblast

Tomsk Oblast

Tatarstan

Belgorod Oblast

Saint Petersburg

Lower than national mean

Yaroslavl Kaliningrad Sverdlovsk Oblast Kostroma Udmurtia Oblast Kaluga Oblast Oryol Oblast Ryazan Lipetsk Oblast Oblast Oblast Oblast Tula Novosibirsk Samara Omsk Oblast Oblast Oblast Vologda Mari Altai Oblast Bryansk Oblast El Krai Nizhny Oblast Chelyabinsk Novgorod Bashkortostan Oblast Kursk Vladimir Oblast Sarato v Kurgan Oblast Oblast Orenburg Oblast Oblast Oblast Republic Primorsky Smolensk of Perm Buryatia Tver Krai Altai Oblast Karelia Krai Oblast Republic Pskov Novgorod Khakassia Khabarovsk Oblast Zabaykalsky Oblast Krai Krai

Kalmykia

Kabar dino− Balkaria

Karachay− Cherk essia

Dagestan

6000

resource poor

3000

Gender inequality in life expectancy

less healthy

Figure 18.5 (Continued)

Life expectancy (years)

Population (thousands)

healthy

Resource poor & fertile − 58285000 inhabitants (40%) − 37 regions Resource poor & less fertile − 47362000 inhabitants (32%) − 26 regions Resource rich & fertile − 18591000 inhabitants (13%) − 9 regions Resource rich & less fertile − 21608000 inhabitants (15%) − 7 regions

Resource poor & healthy − 36958000 inhabitants (25%) − 19 regions Resource poor & less healthy − 68689000 inhabitants (47%) − 44 regions Resource rich & healthy − 28472000 inhabitants (20%) − 5 regions Resource rich & less healthy − 11727000 inhabitants (8%) − 11 regions

Figure 18.6 Classification of Russian regions based on GRP per capita and life expectancy and fertility rate on a map (2012) Source: Rosstat (2013).

The Russian welfare state system

Explaining the outcomes Based on our investigation, it becomes clear that resources and welfare are interconnected issues. Most notably, we argue that the general rise in the living standard brought by the economic growth in the country is the main reason for the improvements in health and birth rates, as shown by the general growth in life expectancy and the birth rate, because improvements in the welfare indicators have been similar throughout the country.This argument about the interconnectedness of welfare and resources is strengthened by our finding that the improvement in health is greater in the rich areas including the metropolitan cities of Moscow and St. Petersburg and the natural resource-rich Tyumen and Belgorod regions and Republic of Tatarstan, in which less than a fifth of Russia’s population live. Concerning the better result in health in those regions, we argue that due to their strong economy, these regions have had more resources to invest in the welfare infrastructure and conduct their own social policies. Rising living standards in the country generally and in the wealthier regions especially have translated into healthier ways of life (nutrition, physical exercise) and better health care services, which have contributed to increased life expectancy. Thus, the improvement in the living standard itself improves health results through its “civilization effect” of healthier behavior. Increased life expectancy in the resource-poor regions can partly be explained by more favorable climate conditions and likely also prevailing cultural traits and religion, which brings temperance and stricter rules of nutrition, for example, because this group of regions mainly consists of the Islamic regions in the Russian South. The regions where life expectancy has not significantly improved despite the available resources are typically northern areas, where the harsh climate and deep social crisis (unemployment, outmigration and anomie) have been seen in high rates of social problems, alcohol consumption, domestic violence and other forms of crime (see e.g. Pilkington, 2012; Nuikina, 2014; Nemirovskaya and Kozlov, 2013). Finally, the regions where almost half of Russians live are the ones which are resource poor and where life expectancy has remained low. Unlike the resource-rich regions, they have very limited possibilities to conduct their own social policy or invest in their welfare service infrastructure. Some special elements of the national project on health, such as cardiovascular clinics, may have contributed in increasing life expectancy, but our empirical results cast serious doubt over the interpretation that positive developments in Russian life expectancy would have been a result of the national project on health (see Zubarevich and Safronov, 2011: 23); the most likely reason resides in the general economic growth. However, our findings concerning the improvements in the fertility rate show that the federal incentives with extra resources might make a difference, especially in the resource-poor regions which have no possibilities for their own social policy. We suggest that the federal maternity capital has played an important role in the improved fertility rates, especially in resource-poor and peripheral rural areas, where the amount of money given can be considered noteworthy for ordinary people. Improvements thanks to federal funds in reproductive health services also make a difference. On the other hand, these incentives have not been effective in metropolitan areas, where the living standard is higher and thus the given money less significant, and where typically, as noted, the fertility rate is globally lower. However, when we look at the resource-rich areas, like Tyumen, which has introduced generous regional maternity capital, we see a significantly improved fertility rate, which supports our earlier argument about the positive effect of being able to conduct social policy at the regional level. Given our main argument of the positive effect of the economy on welfare, we see that as long as most of the regions have low resources, that is under the average GDP, Russia would need a federal policy that would make the regional economic differences smaller for better 307

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welfare outcomes. Russia has not successfully made such redistributive efforts. Instead, Russia’s regional policy has failed to diminish the regional difference.

Developments in the Russian regional policy As in Soviet times, the major idea of post-Soviet Russian regional policy has been the improvement of welfare in underdeveloped areas by redistributing resources from more developed ones (Starodubtsev, 2014: 558). However, in practice, since the collapse of the Soviet Union, Russian regional policy has been ambivalent between two mutually exclusive goals – leveling out the differences between regional development and supporting a limited number of growth centers. In the early 1990s, the federal state granted large powers to regional governors, and as a result, the territorial unity of Russia became increasingly jeopardized as secessionist tendencies grew, especially in multi-ethnic and resource-rich republics such as Sakha, Bashkortostan or Tatarstan. These tendencies were bolstered by Yeltsin, according to whom the government has no coherent regional policy and the regions have to deal with their own problems. In order to guarantee the unity of Russia,Yeltsin’s administration utilized “fiscal appeasement” by granting tax breaks and subsidies to revolting republics. In 1999, after Yeltsin’s resignation, Yevgeny Primakov, the then prime minister of the Russian Federation, demanded “restoration of the vertical state power structure, where all matters would be solved jointly by the centre and local authorities” (Evangelista, 2000, quoted in Ross, 2003: 32). For President Putin, the unity of Russia, achieved only through a strong power and unifying ideology, has been top priority. During the early 2000s, the Russian government took steps to develop a systematic regional policy. In 2004, a special ministry responsible for regional social development was created: the Ministry of Regional Development. But as Kinossian and Morgan (2014: 1683) note, “Spatial policies still remain poorly defined because the federal centre is torn between equalizing development across regions – in line with Soviet tradition – but yet prioritizing development in selected areas.” Another new opening in regional policy took place in 2006, when the Strategy Concept for Socio-economic Development of the Russian Federation was published. The program proposed a radical shift towards “polarized development through identifying and supporting certain regions” with a focus on the growth centers (see Starodubtsev, 2014: 566, 571). Similar efforts have been made in many European countries since the 1960s and 1970s. In such an exogenous developmental mode, new industries and their associated technologies, skills and other resources are imported into selected areas in order to boost the growth of the local economy and with the hope that fast developing growth centers will benefit the regions around them (Murdoch, 2000: 412). The Russian document recommended focusing on financial, administrative, human and other resources in core regions and hoped that the benefits would trickle down to less-developed regions. However, the concept was never accepted, and only two years later, President Putin stressed that regional policies should aim at diminishing differences between the regions so that each region had equal possibilities to offer good living conditions for their populations. Later in 2008, a Concept for Long-term Socioeconomic Development of the Russian Federation until 2020 was prepared, with an emphasis on the need to reduce regional differences and achieve a balanced pattern of socioeconomic development (Kinossian and Morgan, 2014: 1684). Before the ink had dried on the aforementioned openings, the idea of polarized development re-emerged with Dmitry Medvedev as president of the Russian Federation. His idea was to create 20 urban agglomerations with populations over 1 million in order to concentrate intellectual resources and create possibilities for successful cities.12 The global economic crisis seriously hampered the initial ambitions of the growth center policy. However, the measures 308

The Russian welfare state system

to tackle problems of regional development have been predominantly economic, instead of a proactive regional policy. This became evident in December 2013, when all powers concerning the problems of monotowns, previously under the Ministry of Regional Development, were transferred to the Ministry of Economics. Furthermore, the Ministry of Regional Development itself was abolished in September 2014 and its competencies divided among several other ministries (see Starodubtsev, 2014: 569, 572). Such a development obviously jeopardizes consistent regional policy. All in all, it seems that Russian governments have not succeeded in formulating or in implementing any coherent regional policy. Economic growth has played the role of regional policy. Especially during Putin’s presidency, regional policy has not been a top priority (Starodubtsev, 2014). Government policies have vacillated between goals of equalization and centralization. Similar to the Soviet legacy, equalization and redistribution of financial resources has dominated in regional policy measures, even if equalization policies have not brought sustainable results, as regional inequalities have remained unchanged or even increased. Parallel to this old principle, we have seen efforts to pursue policies to support growth centers, but these policies have also failed. As Starodubtsev (2014: 570–571) notes, political support of the Putin regime is stronger in the peripheries. From this point of view, the efforts to redistribute resources from more developed areas to less developed ones might play an important role in electoral policies, which partly explains the vacillation between equalization and centralization. Due to the lack of resources, most regions in Russia have highly limited possibilities to conduct their own social policy, which makes them dependent on contributions from the federal budget. The solution is not however a centralized, federal welfare policy. The solution could be found in a more coherent regional policy, which would allow the development of the institutions necessary to improve the infrastructure and other factors necessary for attaining the helix of positive development. As seen, so far the wealthier regions are more independent of government support and therefore more able to pursue more independent social policies.Thus, when it comes to positive welfare outcomes, there is less sense in supporting growth centers and successful regions in which already existing resources lead to better welfare outcomes. For this reason, a regional policy that redistributed resources to resource-poor regions would better improve well-being throughout the country.

Current and future trends of the Russian welfare state system Analysis of Russian social policy must take into account resources, major structural constraints and key agencies. The considerable improvement in Russian social policy during the first decade of the new millennium was connected with economic growth based on energy resources. Alfio Cerami (2009) has even called this the oil-led miracle of Russian welfare development. The growing oil price was accompanied by a rather consistent implementation of German Gref ’s reform program in economic policy (Sutela, 2012). Energy still remains the key resource of Russian economic growth, covering half of the taxes and two-thirds of export. This also implies – as Cerami also argues – a fundamental vulnerability of Russian welfare policy. In the contemporary situation when the oil price has fundamentally fallen (about US$45 per barrel), Russia is also facing a new challenge in financing the welfare budget. The Russian welfare miracle is also otherwise a rather problematic concept. We have shown (Kivinen, forthcoming; Kulmala et al., 2014) that even in the conditions of a growing economy and strong rhetorical turn towards emphasizing welfare policy, real budgetary development of welfare funding has been highly incremental. Welfare funding has grown only at the same speed 309

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as the other budgetary categories. The only clear exception has been the allocation for family policy to augment the birth rate. This has also reached the desired results in increasing fertility. It is too early to predict how the Russian government will react in the contemporary crisis with the fallen energy price, strong devaluation of the Russian ruble and Western sanctions.The Russian government used pensions as an instrument in its resuscitation policy in 2009 and the first policy measures in the contemporary situation seem to indicate that this will be done again. In 2009, Russia managed to get out of the crisis more rapidly than most Western countries because it had resources in comprehensive stabilization funds.These resources seem to be drying up. By 2015, with the deepening economy due to the Ukrainian crisis, the Russian government stepped back some of its social responsibilities – even in the top priority field of the birth rate. According to Kulmala and Tšernova (2015), for instance, the maternity capital program is most likely being shut down. The Russian regions seem to be currently in trouble with the ever-increasing social obligations under their responsibility: for example, in some regions, there have been delays in the payments of family and child benefits. The authors have suggested that the Fifth Priority Project has come to an end because of the bad economy. Looking at previous developments, one could, however, extrapolate that this cutting may also be highly incremental in the sense that all categories will be cut more or less to the same extent. Apart from this challenge of economic resources, Russian social policy should address the vast problems of regional inequality. Living conditions in Russia vary from those matching the most developed in Europe to those matching Central Africa. During the economic growth period, the economies have grown at a similar speed and no relative improvement in the poorer regions can be observed (Figure 18.7). This implies that the absolute difference between rich and poor regions has been growing. On the basis of our results, one could argue that Russia regional policy might be the key to social policy, so fundamental are the regional differences in incomes and life chances. With regard to welfare outcomes, one should expect more support for the most problematic regions rather than active policy to support prospective regions, which we have seen in recent years, without any great success. In general, as Dusseault (2010) shows, the resources of the regions seem to define their lobbying strength, which is then directly connected with additional support from the federal center. If the regions have resources, the outcomes in social policy are visible. The delegation of social policies to the regions, which has happened, then leaving them without proper resources, does not make much sense. Social classes are weak in Russia (Kivinen and Li, 2012; Kivinen, 2006). This also means that there are no structural constraints for the elite to address inequality in incomes, education or life chances. The elements of state-based social policy might be increasing and there is also some legacy of the Soviet equality (for example when energy policy has a strong social political dimension, see Collier, 2011), but so far the Russian welfare model comes quite close to the Anglo-Saxon liberal form (Kivinen and Li, 2012). With stronger market capacities, the middle classes can live better in these conditions, paying for private (and often corrupt) health and education services. However, the regional differences are so large that the middle class in the peripheries has a considerably lower income than the working class in Moscow. Many global tendencies in welfare policies also dominate the Russian policies, for example, in the standardization of education (Minina, 2014) and de-institutionalization of child welfare (  Jäppinen and Kulmala, 2014; Kulmala et al., 2014). However, in Russia, these tendencies are confronted with a different reality: lack of resources, traditional values and established practices. It would be too straightforward to conclude that the results in any fundamental sense represent some forms of global ideologies.

310

Population (each category consists equal number of regions) Under 830 000

830 000 − 1.23 million

1.23 million − 2.52 million

Over 2.52 million

Tyumen Oblast 42666 Sakhalin Oblast 41783 Chukotka Autonomous Okrug 30908 Moscow 28573 Sakha Republic 18204 Komi Republic 17484 Saint Petersburg 14785 Magadan Oblast 16131 Kamchatka Krai 12761

10000

Krasnoyarsk Krai 13508 Ivanovo Oblast 4180 Dagestan 4141 Karachay−Cherkessia 4048 Kabardino−Balkaria 3972 Tuva 3911

Roubles in year (log−scale)

Kalmykia 3837

Tyumen Oblast 1585 Sakha Republic 878 Chukotka Autonomous Okrug 985 1000 Magadan Oblast 851 Moscow 698 Kamchatka Krai 657 Komi Republic 547 Krasnoyarsk Krai 564 Samara Oblast 507 Murmansk Oblast 510 Adygea 168 Kabardino−Balkaria 165 Tuva 164 North Ossetia...Alania 146 Kalmykia 126

Figure 18.7 GRP per capita in 1996–2012 (log-scale) Source: Rosstat (2013).

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Russia is not a predatory state which would invest all its resources in military budgets or elite consumption. Anyway, there is no systematic social policy. If we look at the evidence of social policy and regional inequality, one could argue that Russia should develop more coherent and active regional policies at the federal level, tailor social policy resources in terms of regions and allocate considerably more resources in health and social policy to diminish the exceptionally dramatic mortality rates. But there is not much evidence that the development would be in that direction. Rather it is easier to predict more cuts in welfare budgets, investments in supporting the strong regions, growing inequality in terms of class and regions: a kind of poor man’s version of the Anglo-Saxon liberal welfare model. This model seems to be enforced by the new (2015) law on social service provision, which provides a strong foothold for private enterprises in welfare. All in all, the Russian welfare mix remains a hybrid without a clear dominance of either neoliberal or statist tendencies. In contrast to the lack of agency in social policy is a growing activism in welfare policy issues which has been developing at the local level. If a matching development came at the regional and federal level, this form of social policy development could be called reflective. Whether this kind of development is at all possible in the contemporary patrimonial political conditions remains to be seen. It might turn out to be dysfunctional from the point of view of the power vertical. So far, the successful element in federal social policy has been based on monetary incentives. Maternity capital in particular seems to have a clear impact on birth rates in peripheral regions.

Summary and conclusions After the collapse of the Soviet Union, the transition to a market economy was shadowed by a deep social crisis. The state-based Soviet welfare regime was eroding as the GDP was declining. Growing inequality, poverty and mortality had to be faced with declining resources. During the Yeltsin presidency, welfare policy aimed at institutional reform, with large processes of liberalization, privatization, and decentralization in the 1990s. These reforms were badly implemented because the resources did not match the welfare functions delegated mostly to the local level. After the chronic problem of under-resourced welfare services under the Russian municipalities, these obligations were almost entirely moved from the municipal level to the regional level. With a few exceptions, the Russian federal state answers only for general policies, principles, and national standards in health and social policies, while the regional governments enact regional laws to organize, manage and finance the related services and subsidies. Thus, the main responsibility of the welfare functions comes under the regional governments. Anyway, our regional comparisons show a vast deviation in terms of life chances between the Russian regions. Most Russians live in rather poor regions, having limited resources to face the immense social problems. But it would be misleading to say that Russia in general is still lacking resources: the real problem is inequality in allocating them. A shift back to a more interventionist role of the Russian federal state in welfare policy took place during President Putin’s second term. Social policy was promoted as one of the government’s top priorities at all governmental levels. Our closer scrutiny of this statist turn, however, shows that the shift was paradoxical and limited in many ways. With the four National Priority Projects (Health, Housing, Education, and Countryside), the Russian federal state invested the budget surplus in welfare institutions. However, in terms of budget outlays, the investment in welfare categories was mostly highly incremental without any visible political will for their growth. The real results concern almost exclusively family policy in the country. A strong

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family-centered ideology has characterized governmental policy programs and the pro-natalist family policy has unquestionably focused on augmenting the birth rate. Thus the welfare rhetoric of the Russian elite does not really match the real social policies. Real results have been achieved in the birth rate whereas the most exceptional and crucial issue of male mortality has not been addressed. Our regional elaboration shows that transition has ruined the traditional male forms of labor in industry and agriculture, causing vast social and health problems with high mortality rates. This is the case in the Russian regions that we have characterized as sick and poor. It must be noted that almost half of Russians live in these regions. In more affluent regions, the economic improvement can be seen in the declining difference between the genders in life expectancy. Poorer regions also have more limited resources for social policy. There seem to be serious discrepancies between federal policies and regional circumstances. So far, regional and local agencies of social policy do not find much support from federal regional policy.We would be inclined to agree with Thomas Remington (2011: 23) who argues that a “commercialized and privatized set of mechanisms for determining issues of employment, health care, pensions or other social benefits” means that “social policy is primarily aimed at preventing social unrest rather than reshaping private incentives. It is defensive rather than transformative.” He also notes that many social groups lack effective means to participate in the formation of social policy, which is largely subject to “deliberative bargaining, involving business interests, and, to a lesser degree, labour.” In the contemporary political and economic constellation, the vulnerabilities of the Russian oil-led welfare regime might be realized. By 2015, we have already seen cuts in social expenditure even in the prioritized areas, and regional governments facing difficulties in fulfilling their social obligations. The paradoxical and contradictory policy seems to be here to stay.

Notes 1 See a comprehensive analysis of the Soviet social contract and welfare arrangements in Cook (1993). 2 Information in the table adopted from De Silva et al. (2009: 55). 3 We should briefly mention that the powers of education are divided according to the grade of education among the three governmental levels: the federal level is responsible for higher education, the regional level for intermediate schools and the municipal districts for elementary schools (Kulmala, 2013: 91). 4 For example Remington (2011: 23) gives credit to governmental efforts to level off interpersonal and regional inequalities through national projects and special measures to support the unemployed, enterprises and banks. 5 The concept of family is defined as married couples or single parents with children. A normative distinction between well-functioning and disadvantaged families is made: a well-functioning family is defined as an economically secure and socially active family formed by a married couple and their two or more children, or a family oriented towards having children, whereas families formed by a single parent are automatically disadvantaged. Furthermore, nothing is said to break the traditional gender roles. See, for example, the National Concept of Family Policy (NCFP), accepted in August 2014; National Concept of Policy Concerning Young Families (NCPYF). 6 However, very recently the Russian state has also introduced policies that turned attention to so-called disadvantaged families and children through a massive and ongoing child welfare reform, essentially the reformation of the foster care system (Kulmala et al., 2014). 7 The retirement age is 60 for men and 55 for women, with some regional differences. 8 Special thanks to Daria Popova for inspiration. The data for HDI is exceptionally from 2010. 9 We wish to add that spatial inequality in contemporary Russia is characterized not only by regional difference but also large urban-rural differences (see e.g. Wegren, 2014). Income inequality is also gendered and generational: the majority of the poor are women, including single mothers and widows, yet the extreme poor are men.

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10 All analyses were conducted using R (R Core Team, 2014). A specific package regioncoderus for working with Russian regional data was initialized within the project (Kainu, 2015). 11 The Russian Federation consists of 85 federal subjects that are constituent members of the Federation. There are six subtypes of federal subjects, all of equal federal rights as having equal representation – two delegates each – in the Federation Council (upper house of the Federal Assembly). They do, however, differ in the degree of autonomy they enjoy. Autonomous okrugs are unique in having a peculiar status of being federal subjects in their own right, yet at the same time being considered to be administrative divisions of other federal subjects (Chukotka Autonomous Okrug being the only exception). 12 One example of the embodiment of this policy is Skolkovo, a project to create a Russian version of an innovative city based on knowledge economy.

References Akhmedjonov, A.; Lau, M.C.K., and I˙zgi, B. B. (2013), New Evidence of Regional Income Divergence in Post-Reform Russia, Applied Economics,Vol. 45, No. 18, pp. 2675–2682. Borozdina, E.; Rotkirch, A.; Temkina, A., and Zdravomyslova, E. (2014), Using Maternity Capital: Citizen Distrust of Russian Family Policy, European Journal of Women’s Studies,Vol. 22, pp. 1–16. Cerami, A. (2009), Welfare State Developments in the Russian Federation: Oil-Led Social Policy and “The Russian Miracle,” Social Policy and Administration,Vol. 43, No. 2, pp. 105–120. Chandler, A. (2013), Citizenship, Social Rights and Judicial Review in Regime Transition: The Case of Russia, Democratization,Vol. 21, No. 4, pp. 1–24. Chernova, Z. (2013), Sem’ia kak politicheskii vopros. Gosudarstvennyi projekt i praktiki privatnosti, European University at Saint Petersburg: Saint Petersburg. Collier, S. J. (2011), Post-Soviet Social: Neoliberalism, Social Modernity, Biopolitics, Princeton University Press: Princeton, NJ. Cook, L. J. (1993), The Soviet Social Contract and Why It Failed:Welfare Policy and Workers’ Politics from Brezhnev to Yeltsin, Harvard University Press: Cambridge, MA. ——— (2007), Postcommunist Welfare States: Reform Politics in Russia and Eastern Europe, Cornell University Press: Ithaca, NY. ——— (2011), Russia’s Welfare Regime: The Shift Toward Statism, in M. Jäppinen, M. Kulmala, and A. Saarinen (eds.), Gazing at Welfare, Gender and Agency in Post-Socialist Countries, Cambridge Scholars: Newcastle Upon Tyne. De Silva, M.; Kurlyanskaya, G.; Andreeva, E., and Golovanova, N. (2009), Intergovernmental Reforms in the Russian Federation: One Step Forward, Two Steps Back, The International Bank for Reconstruction and Development/The World Bank: Washington, DC. Dolinskaya, I. (2002), Transition and Regional Inequality in Russia: Reorganization or Procrastination? International Monetary Fund: Washington, DC. Dusseault, D. (2010), Elite Bargaining and the Evolution of Centre-Periphery Relations in Post-Soviet Russia: A Comparative Analysis, University of Helsinki: Helsinki. Evangelista, Matthew (2000), Russia’s Path to a New Regional Policy, PONARS Policy Paper, No. 157, Davis Centre for Russian Studies, Harvard University: Boston, MA. Jäppinen, M. and Kulmala, M. (2014), Uusi lastenkoditon Venäjä? Idäntutkimus,Vol. 4, pp. 58–59. Jäppinen, M.; Kulmala, M., and Saarinen, A. (eds.) (2011), Gazing at Welfare, Gender and Agency in PostSocialist Countries, Cambridge Scholars: Newcastle Upon Tyne. Kainu, M. (2015), Regioncoderus: Language Conversions for Russian Region Names and Support Files for Spatial Analysis, https://github.com/muuankarski/regioncoderus. Kinossian, N. and Morgan, K. (2014), Development by Decree: The Limits of “Authoritarian Modernization” in the Russian Federation, International Journal of Urban and Regional Research, Vol. 38, No. 5, pp. 1678–1696. Kivinen, M. (2006), Classes in Making? The Russian Social Structure in Transition, in G. Therborn (ed.), Inequalities of the World,Verso: London.

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Kivinen, M. and Li, C. L. (2012), The Free-Market State or the Welfare State? in C. Pursiainen (ed.), At the Crossroads of Post-Communist Modernisation: Russia and China in Comparative Perspective, Palgrave Macmillan: Houndmills. Kulmala, M. (2013), State and Society in Small-Town Russia: A Feminist-Ethnographic Inquiry into the Boundaries of Society in the Finnish-Russian Borderland, Publications of the Department of Social Research, University of Helsinki: Helsinki. Kulmala, M.; Kainu, M.; Nikula, J., and Kivinen, M. (2014), Paradoxes of Agency: Democracy and Welfare in Russia, Demokratizatsiya:The Journal of Post-Soviet Democratization,Vol. 22, No. 4, pp. 523–552. Kulmala, M. and Tšernova, Ž. (2015), Työn ja Perheen Yhteensovittaminen Venäjällä, Idäntutkimus, Vol. 2, pp. 17–34. Lankina, T. V. (2003), Managing the Grassroots: Putin’s Reform of Local Government, Russia and Eurasia Review,Vol. 2, No. 9. Levintova, M. (2007), Russian Alcohol Policy in the Making, Alcohol and Alcoholism, Vol. 42, No. 5, pp. 500–505. Lobao, L. M.; Hooks, G., and Tickamyer, A. R. (2008), Poverty and Inequality Across Space: Sociological Reflections on the Missing-Middle Subnational Scale, Cambridge Journal of Regions, Economy and Society, Vol. 1, No. 1, p. 89. Milanovic´, B. (1998), Income, Inequality, and Poverty During the Transition from Planned to Market Economy, World Bank: Washington, DC. ——— (2005), Worlds Apart: Measuring International and Global Inequality. Princeton University Press: Princeton, NJ. Minina, E. (2014),Why Doesn’t the Telephone Ring? Reform of Educational Standards in Russia, InterDisciplines, Journal of History and Sociology,Vol. 5, No. 2, pp. 1–44. Murdoch, J. (2000), Networks – A New Paradigm of Rural Development? Journal of Rural Studies,Vol.  16, No. 4, pp. 407–419. Nemirovskaya A. and Kozlov V. (2013), Demographic aspects of social modernization of the regions of the Siberian Federal District. Tyumen State University Herald, no 8, pp. 67–76. Neufeld, M. and Rehm, J. (2013), Alcohol Consumption and Mortality in Russia since 2000: Are there any Changes Following the Alcohol Policy Changes Starting in 2006? Alcohol and Alcoholism,Vol. 48, No. 2, pp. 222–230. Nuikina, E. (2014), Making a Viable City:Visions, Strategies and Practices, University of Vienna:Vienna. Pilkington, H. (2012), “Vorkuta is the Capital of the World”: People, Place and the Everyday Production of the Local, Sociological Review,Vol. 60, No. 2, pp. 267–291. R Core Team (2014), R: A Language and Environment for Statistical Computing,Vienna. Remington, T. F. (2011), The Politics of Inequality in Russia, Cambridge University Press: Cambridge. Rivkin-Fish, M. (2010), Pronatalism, Gender Politics, and the Renewal of Family Support in Russia: Toward a Feminist Anthropology of “Maternity Capital,” Slavic Review,Vol. 69, pp. 701–724. Ross, C. (2003), Putin’s Federal Reforms and the Consolidation of Federalism in Russia: One Step Forward, Two Steps Back! Communist and Post-Communist Studies,Vol. 36, No. 1, pp. 29–47. Rosstat (2013) Регионы России. Социально-экономическиепоказатели. Федеральнойслужбыг осударственнойстатистики. Москва. Rotkirch, A.; Temkina, A., and Zdravomyslova, E. (2007), Who Helps the Degraded Housewife? Comments on Vladimir Putin’s Demographic Speech, European Journal of Women’s Studies, Vol. 14, No. 4, pp. 349–357. Saarinen, A. (2012), Welfare Crisis and Crisis Centres in Russia Today, in H. Carlbäck,Y. Gradskova, and Z. Kravchenko (eds.), And They Lived Happily Ever After: Norms and Everyday Practices of Family and Parenthood in Russia and Eastern Europe, Central European University Press: Budapest. Starodubtsev, A. (2014), Agency Matters: The Failure of Russian Regional Policy Reforms, Demokratizatsiya,Vol. 22, No. 4, pp. 553–574. Stuckler, D.; King, L., and McKee, M. (2009), Mass Privatisation and the Post-Communist Mortality Crisis: A Cross-National Analysis, Lancet,Vol. 373, No. 9661, pp. 399–407.

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19 The Turkish welfare state system With special reference to human capital development Adem Yavuz Elveren and Tuba I. Agartan

Turkey defined itself as a social state in the 1961 Constitution, which assigned the state a major responsibility for providing all citizens with both preventive and curative services on the basis of equality, regardless of employment status and financial means.This “social state,” in terms of its historical evolution, has not expanded to bring about a universalist welfare regime. Rather, as in the Southern European Model, a dual welfare system emerged: a highly fragmented and hierarchical social security regime existed alongside an informal system where family and informal welfare mechanisms played an important role (Bug˘ ra and Keyder, 2006). The 1980 military coup marked the beginning of a new era for Turkish welfare regime with a market-oriented economic orthodoxy.This transformation reached its peak when the Justice and Development Party (AKP) came to power in 2002. The most visible changes since that time have been in social security, education and health provisions. In 1999, the government implemented a two-pillar system in which current social security institutions (the first pillar) were maintained after overhauls to their structures, along with private pension schemes which provided support (the second pillar). A series of administrative reforms, including increasing the retirement age, have been implemented to rein in the deficit in the social security system. In 2006, the General Health Insurance (GHI) system was introduced. Also, a new institutional structure was established to integrate current social security institutions under a single roof. On the other hand, there are two main reforms in the education system. In 1997, compulsory schooling was increased from 5 to 8 years, and then from 8 to 12 by the 2012 reform with the highly contested “4+4+4” law. This chapter examines these changes with a focus on human capital. The second section discusses the characteristics of the broader social security system and explains the changes in pensions and health care. The third section explores the human capital dimension of the health care reform before drawing attention to changes in the education system. The fourth section provides a discussion on the future of the Turkish welfare system paying a special attention to implications for gender equality.

The welfare state system in Turkey Although the welfare state in Turkey has some similarities with the “conservative/corporatist” model of Esping-Andersen’s famous categorization, as a developing country Turkey can be 317

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referred to as an indirect and minimalist welfare regime (Esping-Andersen, 1990; Arın, 2002). The regime involves high hierarchies for beneficiaries like conservative regimes, but does not cover everyone; therefore, it can be called “inegalitarian corporatist” (Ag˘ artan, 2008; Günal, 2008). Indeed, Turkey is included in the medium de-commodifying group of the Southern European model (Gough, 1996; S¸ener, 2006). Bug˘ ra and Keyder (2006) explain the similarities between the welfare regime in Turkey and the Southern Europe model. First, like other countries that belong to this classification, Turkey has a labor market structure in which employment provided by small employers, self-employment, unpaid family workers, and informal employment are very important. Second, the social security system is highly fragmented, and social rights are unequally distributed. Health and pension benefits are given to formally employed heads of household according to their status at work.Third, the formal social security system has limited functions in fighting against poverty and social exclusion.These responsibilities were left to voluntary initiatives. Finally, due to the absence of an advanced social assistance scheme, the family plays a crucial role in coping with social risks.That is, the family is the core element in the welfare regime as observed in the Southern European model (Kalaycıog˘ lu and RittersbergerTılıç, 2000; Bug˘ ra and Keyder, 2006). The responsibility of “social assistance” is mainly undertaken by family, along with charity and voluntary organizations. In Turkish society, the extended family has played an important role in supporting individuals against some contingencies. However, it is argued that social, demographic and economic changes have challenged this role: first, there often is not sufficient income to support all members of the extended family; second, traditional extended families are being replaced by nuclear families (Bug˘ ra and Keyder, 2003; Kalaycıog˘ lu, 2006; Dedeog˘ lu, 2009). Kalaycıog˘ lu (2006) argues that in the Turkish experience, the existence of family/kin and other social networks may be effective in preventing their members from falling into absolute poverty, but relative poverty will persist, for dependence on such networks is itself an indicator of relative poverty. Furthermore, from a gender perspective, family/kin support systems force both women and men to feel dependent on the family/kin in all aspects of life.1 The institutional structure of the social security system is summarized in Table 19.1. Accordingly, the Turkish social insurance system used to consist of three main institutions: 1

2

The Social Insurance Institution (SSK) was set up in 1946 for blue-collar workers employed in the public sector and all workers in the private sector. SSK entitles contributors to work injury and occupational disease insurance, sick leave, maternity insurance, disability insurance, old-age insurance and death grant. The Retirement Fund (RF) was set up in 1950 for civil servants. RF provides the following benefits to its contributors with respect to different requirements: retirement pension,

Table 19.1 The structure of the social security system in Turkey before the reform

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The Social Assistance Supplement, 1977 The Old Age and Disability Assistance Scheme, 1977 The Social Services and Child Protection Agency, 1983 The Social Assistance and Solidarity Encouragement Fund, 1986 The Green Card Program, 1992 Conditional Cash Transfer Program, 2001

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3

job disability pension, disability pension, survivors’ pension, retirement bonus, death grant, marriage bonus, lump-sum payment and repayment of contribution. The Social Security Institution of Craftsmen, Tradesmen and other Self-Employed (BagKur) was established in 1971 in order to cover farmers, artisans and any remaining selfemployed people. Bag-Kur, however, provides relatively low levels of benefits, such as disability insurance, old-age insurance, death grant and health insurance.

The essential parts of social assistance are (1) the Green Card Program, which is financed by the Fund for the Encouragement of Social Cooperation and Solidarity and covers 14.1 percent of population and was introduced in 1992, and (2) the conditional cash transfer (CCT) program introduced by the World Bank in 2001 after the economic crisis. The old social security system presented several problems. First of all, the fragmented structure and the lack of uniformity in norms and standards created hierarchies among the beneficiaries of social insurance. Civil servants occupied the top tier in this hierarchy. As a matter of fact, they have always had a remarkable advantage in terms of benefit to contribution ratio. While the SSK beneficiaries and the RF members did not pay separately for health insurance, Bag-Kur members had to pay 12 percent of their income in addition to the 20 percent they paid for pensions. Further, benefit packages and co-payments differed extensively: insurance schemes offered varying levels of coverage, and co-payments ranged between from 10 to 20 percent of the total costs (mostly in the case of pharmaceuticals or necessary medical equipment such as prosthesis or spectacles). The second major problem of the social security system was that the system was not able to address the new poverty in Turkey (Bug˘ ra, 2012). Bug˘ ra states that the commercialization of agriculture and ongoing armed conflict in the southeast region in Turkey resulted in an increase in rural-urban migration. These developments along with expanding flexible employment that cause the informality in the absence of supportive networks have created new poverty. Therefore, Bugra (2012) rightly argues that in addition to fiscal sustainability and administrative inefficiency, the main reason for social security reform was to deal with this changing face of poverty. The third problem concerned growing financial difficulties. Mostly due to an extremely low retirement age and an expanding informal sector, the social security system has presented an increasing deficit since the early 1990s. The ILO Report, titled “The Turkish Government Social Security and Health Insurance Project” (ILO, 1996), provided the main guidelines for the ongoing social security reform. The total deficit of the social security system in Turkey was predicted to reach 10.1 percent of GDP in the absence of intervention by the year 2050 (ILO, 1996). The same report projected that in the case of a proposed reform, the deficit of the system will drop to a negligible level by 2040 (i.e. 0.6% of GDP). Thus, the government realized comprehensive social security reform was a matter of urgency in order to reduce the pressure of social security institutions on the public deficit. Following this report, the central government implemented two main reforms in 1999 and 2006 in line with the approaches of the International Monetary Fund (IMF) and the World Bank. As part of the 1999 reform, the government implemented a two-pillar system in which current social security institutions (the first pillar) were maintained after overhauls to their structures, along with private pension schemes which provided the support (the second pillar). The main goals of the 1999 reform were to extend the average contribution period and shorten the benefit collection period by increasing the minimum entitlement age.2 The low retirement reform (i.e. 38 for women and 43 for men) was increased gradually for persons starting work for the first time and will reach 65 years for both men and women by 2048.The reforms were twofold. The first proposal was to set out the legal framework for voluntary private pension funds 319

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in the Individual Pension System (IPS), which aimed to complement the public pension system. The second proposal in the reform package was to set up a series of administrative reforms to rein in the deficit of Turkey’s three state social security funds. The IPS was introduced as a complement to the public pension system on the basis of voluntary participation and the defined contribution principle to provide a supplementary income during retirement3 (Elveren, 2003). These individual savings also aimed to contribute to economic development by creating long-term resources for the economy and thereby increase employment (Elveren, 2003). After passage of the law and other legislation to strengthen the base of the system, the IPS began on October 27, 2003, with the contribution of six pension companies. As of this writing, there are 13 pension companies operating in the system. Since the IPS was introduced, there has been a steep increase in the number of participants in the system. While there were about 315,000 people in the system at the end of 2004, this number doubled by the end of 2005 to reach 666,000. The participation rate continued to rise, adding around 400,000 more people to the system every year since. As of this writing, there are over 4.5 million participants in the system (EGM, 2014). The recent reform in 2006 had four main goals. The first was to launch the General Health Insurance (GHI) system, which aimed to cover every citizen by providing basic health services. The second was to gather the dispersed social benefits that have been provided by several institutions (i.e. SSK, RF, Bag-Kur) with respect to different criteria. The third aim was to establish a new retirement insurance program. Finally, the last was to set up a new institutional structure to integrate institutions under a single roof. With this reform, contribution and benefit conditions of the three institutions were equalized. That is, the hierarchy and discrepancy in terms of benefits between workers, civil servants and the self-employed were eliminated. The main objective of GHI is to integrate all health insurance benefits and cover all citizens. Therefore, a single Social Security Institution (SSI) was created that united all three public insurance funds and the Green Card Scheme – previously covering health care needs of lowincome citizens. This single payer system constitutes an important step towards reducing fragmentation and expanding coverage: First, by 2011, 99.5 percent of the population was reported to have public coverage (OECD, 2013). Second, a comprehensive benefits package – including preventative and primary care, diagnostic and curative services (ambulatory and inpatient care), mental health services, laboratory services, rehabilitation, pharmaceuticals, and medical aids and appliances – was introduced, and patients could access the same types of health facilities. However, besides these universalist components, the particular health reform package in Turkey, the so-called Health Transformation Program (HTP), includes market-based elements as well as managerial reforms. Therefore, the HTP has been subject to fierce debates, and some of the major stakeholders, such as unions representing health workers and Turkish Medical Association (TMA), vehemently oppose the main aspects of the reforms. There are important structural changes in the new health care system. First, a purchaserprovider split was established in 2005 when all health facilities operated by public institutions were transferred to the Ministry of Health (MOH). In this new system, publicly insured citizens can access care in public and private facilities that have contracts with the single payer. While expanding the range of providers available to provide care, private providers are allowed to charge additional fees to patients. Second, as part of the trend to restructure the Ministry of Health and redefine it as a planning and supervising authority, independent directorates were created. The Directorate of Public Hospitals Institution was established in 2011, and public hospitals were granted financial and administrative autonomy. Here autonomy implies financing their activities with their own revenues as well as taking the responsibility for quality and efficiency of services.This new system constituted the next step in the establishment of competitive 320

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markets in health care where public hospitals compete with private ones for the contracts with the single payer. Reforms further allow hiring hospital managers (CEOs) on a contractual basis – a policy that was criticized by the TMA. In addition to the implementation of a purchaser-provider split and independent directorates, the primary care system also went through a major reorganization with a shift to family medicine. Under the new system, family practitioners (primary care doctors) are paid on a per capita basis with an additional component based on performance. As for provision of mental health services, although primary care physicians are authorized to prescribe psychotherapeutic medications with restrictions, the majority of them have not received official in-service training on mental health within the last 5 years (WHO, 2011), and mental health preventive and promotion programs do not exist at the primary care level (Tatar et al., 2011: 143). Recognizing the high burden of disease associated with neuropsychiatric disorders – about 17.0 percent of the global burden of disease (WHO, 2008) – the MOH prepared a new National Mental Health Policy Document in 2006, followed by an Action Plan in 2011. The Action Plan announced a road map for reforming mental health services until 2023. For the short term, the plan envisioned the creation of community-based mental health services, which implied a shift of services from mental hospitals to the community setting and their integration into primary care (Tatar et al., 2011; WHO, 2011). Many scholars consider health care reforms as a step towards commodification of health services (Erdog˘ du, 2006; Hamzaog˘ lu and Yavuz, 2006; Elveren, 2008a; Cos¸ar and Yeg˘ enog˘ lu, 2009). For instance, drawing attention to the share of informal sector (almost half of the labor force) in the Turkish labor market (WB, 2006b), critics argue that the method of financing – mandatory social contributions – puts some workers at a disadvantage in terms of accessing affordable insurance coverage. Also, due to higher unemployment and lower informal paid work, women are more likely not to be able to pay GHI premiums (Yenimahalleli-Yas¸ar, 2008). Critics also voiced concerns about extra fees charged by private providers, which could lead to higher out-of-pocket payments and worsen inequalities among the higher- and lower-income citizens in terms of accessing high quality health services (Yenimahalleli-Yas¸ar, 2008). Out-of-pocket (OOP) health care expenditures increased 3.5 times between 1999 and 2007 and constituted 21.8 percent of total health care expenditures (TurkStat, 2014). Despite some indications that OOP is declining – it was 19.2 percent of total health care expenditure in 2011 (OECD, 2014a) – Turkey is still among the OECD member states with the highest levels of OOP spending. Moreover, the share of private provision has expanded drastically since 2002: the number of private hospitals has expanded by nearly 90 percent and the number of private beds increased from 5,693 in 2002 to 23,542 in 2012 (OECD, 2014a: 92). Considering the rise in the number of beds alongside the increase in the number of patients served by private hospitals, from 4.4 million in 2002 to 46.2 million in 2009, Tatar et al. concludes that private sector is more involved in providing outpatient care than inpatient care (2011: 127). As critics rightly point out, these issues that emerge in the implementation phase demonstrate an important contradiction in the social security reform: one of the main objectives of the broader reform initiative is to fight against poverty and reduce inequalities. However, considered as a whole, the HTP creates a system where citizens could not access services if they did not pay their contributions and where they could buy better services (defined in terms of quicker access to specialists, quality of facilities and customer service, and type of services and diagnostic tests) if they had the resources to afford additional payments. In other words, with this reform, patients are being turned into consumers, health facilities into enterprises, and the health care system into a competitive market. 321

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Human capital development and Turkish social policy What follows is a brief discussion of reforms in both the health care provision and the education system and problems in Turkey’s human capital development. The first subsection emphasizes the imbalances in the health care provision in terms of physician-to-patient ratio, distribution of health staff and facilities with respect to the recent reform. The second subsection underscores two main problems of the education system that threaten the human capital development, namely inequalities between genders and regions, and low quality in general.

Health care reform and challenges of developing human capital in the health care system In terms of human capital, low physician-to-patient ratio, unequal distribution of health staff and facilities, and imbalances in the skill mix have been major challenges in the provision of health services in Turkey (Aran and Roks, 2014, Tatar et al., 2011; WB, 2003). In comparison to the OECD average of 30,Turkey has 15 physicians per 10,000 population in 2005 (see Vujicic et al., 2009: 12). The nurse-to-patient ratio was similarly lower in Turkey, with 18 per 10,000 population in 2005 in contrast to the OECD average of 89 per 10,000. In addition to staff shortages, the imbalances in the skill mix increase the burden on health care workforce. Nurse-to-physician ratio is 1.4 nurses per physician, which is very low relative to the OECD average of 3.1 in 2006 (Vujicic et al., 2009: 12). A recent review of the Turkish health system argues that this imbalance is the result of a “lack of effective human resources planning and management, which for many years has tended to prioritize physicians over nurses and to neglect the gaps in nursing and other health care personnel” (Tatar et al., 2011: 99).There is also an imbalance between specialists and general practitioners that can be attributed to a long-time emphasis on secondary health services, better earning capacity, higher prestige, and better career opportunities available to specialists (Tatar et al., 2011: 99). Analyses of the HTP reforms underscore absenteeism, low productivity, and a shortage of facilities and health workforce, especially in the east and southeast parts of the country, as serious challenges (Baris et al., 2011; Akinci et al., 2012). Major reform documents identified addressing these problems and strengthening human resources capacity as necessary steps to ensure the long-term success of the HTP reforms (MOH, 2003, 2010). However, it is important to note that the peculiar combination of universalist, managerial, and market-based reforms in the HTP increased the burden on an already strained health workforce. Expansion of insurance coverage, especially in the absence of a strict gatekeeping system where primary care physicians controlled access to secondary and tertiary care, increased the demand for health care services. Furthermore, the implementation of new programs such as the family medicine system required a major increase in the number of physicians trained in family medicine. Despite MOH’s efforts to increase the number of family physicians quickly through higher salaries and short-term training programs for general practitioners, the share of family physicians in the total physician labor force was only 3 percent in 2007 (Vujicic et al., 2009: 18). Therefore, the MOH proposed some strategies to increase supply of physicians and improve the management of human resources. However, corporatist actors such as trade unions and doctors’ associations were not accorded a central role in the governance of the health care system.The physicians’ and nurses’ associations were not consulted in the development of policies, and the government often implemented policies despite fierce opposition from physicians and health professionals. One such contentious policy is increasing the seats in medical schools through expanding quotas allocated for these schools in the university entrance exam. Based on data from 322

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local physicians’ associations, a recent World Bank discussion paper estimates an increase in the number of medical students from 4,450 students in 2003 to 11,037 students in 2013 (Aran and Roks, 2014: 19). On the other hand, to address regional disparities in the distribution of health professionals, the MOH developed two policies: expanding contract-based employment of health professionals and enforcing mandatory service. By setting higher rates of payment through contracts for the east and southeast regions, the MOH tries to attract physicians, nurses and midwives to work in these deprived areas. Initial assessments of these contractual methods do indeed indicate improvements in recruitment of nurses and midwives in deprived areas, but limited success in the recruitment of general practitioners and specialists (Aran and Roks, 2014: 8). The TMA has long opposed contract-based employment and criticized the recent practices implemented within the HTP framework as “creating health manpower without job security” (Akinci et al., 2012: 25). As opposed to civil-service based employment which is advocated by the TMA, the contract-based employment does not provide full rights, and transfer to another post is not allowed (Aran and Roks, 2014). The mandatory service practices, on the other hand, have a longer history in the Turkish health care system dating back to the early 1980s as a way to address the regional disparities. In the HTP framework, mandatory service was defined as “compulsory public service for new graduates of public medical schools and for new graduates of medical specialty education for a period varying between 300 and 600 days depending on the residential area to which they were appointed” (Aran and Roks, 2014: 9). Since 2005 the program has strictly been enforced: a physician is not allowed to practice medicine if he or she refuses to serve under the compulsory service system (Aran and Roks, 2014). Another contentious initiative in the management of human capital under the HTP is the Full-Day Law. Although the majority of physicians work in the public sector – approximately 57.6 percent of all physicians were employed in the MOH in 2007 (Vujicic et al., 2009: 29) – dual employment was a common practice before the HTP reforms. Physicians who worked in MOH hospitals or public university hospitals were allowed to work part time in the private sector and see patients in their private offices or other private health facilities. MOH blames this practice for absenteeism and low productivity in the public hospitals and argues that it leads to corruption because some of these physicians refer their patients in the public sector to their private practices. Therefore, since 2010 the government has taken a number of steps to ban dual employment. Passing the legislations and implementing them, however, have proven to be quite difficult. The TMA and the main opposition party fiercely opposed the ban; there were reports of welltrained specialists leaving public sector hospitals in large numbers, and the Constitutional Court annulled some parts of the relevant legislations. As of January 2015, the practice of working part time in privately owned offices is banned, but physicians in public university hospitals are permitted to work in private health facilities after the end of the official working hours. As this summary of recent human resources policies demonstrates, the Turkish government has been carrying out major health care reform without the participation of major stakeholders, such as the national physicians’ and nurses’ associations or unions representing health professions. This is particularly problematic in a field such as health care where provision of services effectively depends on health workforce.

Education policy and human capital development The major fundamental problems in the education system are inequalities and low quality of teaching. Although some quantitative targets (schooling rates, etc.) have been reached, the 323

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system suffers from inequality between socio-economic groups as well as geographical regions. Among OECD countries, Turkey has a higher-than-average proportion of underperforming students, and academic achievement is particularly low among disadvantaged students from low socio-economic backgrounds (OECD, 2014b). The overly centralist governance mechanisms in the public system imply less flexibility and a limited capacity for school leaders. In addition, weak training of teachers at the college level is often an important factor leading to serious questions about the quality of education. Rather than addressing these problems, the current move towards privatization seems to be exacerbating the inequalities. Indeed, among OECD countries,Turkey, along with Brazil and Mexico, has the highest gap between public and private institutions in terms of the number of students to teaching staff. The financing of public education (including public colleges) in Turkey is mainly undertaken by the state. Particularly, with the introduction of an eight-year compulsory education in 1997, total public education spending (as a share of GDP) increased from 3.77 percent in 1997 to 4.48 percent in 1999 (but since then has been on a downward trend). In addition, and similar to trends in other OECD countries, Turkey started to expand the variety of sources for financing education. Since the 1990s, the private sector has been encouraged particularly for higher education. Increasing revolving funds, private investments, and different types of collaborations with the private sector, such as public-private partnerships and expansion of contractual relations, are strongly encouraged. Not surprisingly, citizens’ budget share of out-of-pocket expenditure on education has substantially increased in this era (Cangöz, 2010). For instance, in 2002 out-of-pocket spending by households constituted 33.4 percent of total spending on education whereas public spending was 62.3 percent (WB, 2006b). It showed that the share of out-of-pocket spending in household budget significantly increased for all income groups from 2003 to 2009 (Sulku and Abdioglu, 2014). When the AKP came to power in 2002, it announced addressing flaws in the education system as one of its priorities. Describing “efficient use of human capital” as a central component of the ability of a nation to compete effectively, emphasis was placed on strengthening primary education and expanding access. Between 2002 and 2011, the Ministry of National Education implemented a curriculum reform, introduced conditional cash transfers, and carried out a campaign called “Girls, Let’s Go to School.” As a result, class size at the primary levels reduced substantially, and some improvements in gender parity were seen – especially in secondary education (UNESCO, 2014). In line with these initiatives, expenditure on all levels of educational institutions as a percentage of GDP has increased from 2.5 percent in 2000 to 4.2 percent in 2011 (OECD, 2014b). However, these levels have remained much lower compared to EU countries or OECD members. On average, the share of education expenditures (provided by the state) in GDP in the EU area has been 1.5 times higher than those in Turkey. Similarly, while the OECD average is 5.6 percent,Turkey’s average is 4.1 percent.The gap becomes wider when we examine the public expenditure per student: annual expenditure per in 2011 (in equivalent US$ converted using PPPs) for primary through tertiary education is US$3,240 in Turkey, while OECD average is US$9,252, ranking Turkey the second lowest, slightly higher than Mexico (OECD, 2014b). The same expenditures for the pre-primary level were US$2,000 and US$6,043, respectively (OECD, 2014). Again for 2011, Turkey ranks the lowest in OECD in terms of the cumulative expenditure per student (in equivalent US$ converted using PPPs) over the average duration of tertiary studies (OECD, 2014). More importantly, such an increase in spending has not led to clear improvements in basic educational indicators. Indeed, compared to other OECD countries, Turkey ranks either the 324

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lowest or second lowest after Mexico with respect to many basic educational indicators (OECD, 2014b). For example, in 2012 only Mexico ranked lower than Turkey in upper secondary graduation rates in terms of the percentage of tertiary-educated adults and population whose highest level of education is upper secondary or post-secondary non-tertiary. Similarly, the outcomes of educational reforms are not impressive in terms of addressing socioeconomic and regional inequalities. Studies show that financial resources are not allocated with the aim of reducing spatial gaps in educational attainments (Cangöz, 2010). In fact, although there have been some improvements4 discrepancies in educational opportunities and attainment between urban and rural citizens, genders, and the west and east regions of the country remain as serious challenges (WB, 2006a). A recent report by UNESCO highlights regional differences in gender parity stating that in rural areas girls are more disadvantaged, and regional differences between the east and west have been “not only deep but persistent” (2014: 9).There are also remarkable gaps in quality. For example, the schools in the east or in rural areas are likely to perform poorly in the tests (Ferreira and Gignoux, 2010). Demographic pressures and teacher shortages constitute one of the important challenges for increasing student performance and addressing these inequalities.The large percentage of young population combined with initiatives to expand access has increased the pressure on the education system. One of the clearest signs of growing pressure is the teacher shortage. For instance, in 2012 the ratio of pupils to teaching staff in early childhood education in Turkey was 20.93 percent compared to the OECD average of 14.46 percent (OECD, 2014b). Despite initiatives such as mandatory service in the public K–12 system, persistent inequalities remain in the pupil-teacher ratio across regions. The quality-quantity issue is also striking in the context of higher education. The number of universities jumped from 70 in 2003 to 196 in 2014, with a substantial deficit in the number of (competent) instructors and infrastructure.5 Although the government implemented some incentives to create reverse brain drain, the outcome was not satisfactory.6 It is evident that the majority of universities have very poor research performance (Tekneci, 2014). This poor performance becomes more severe as one considers the fact that Turkey has relatively high expenditures on higher education. While OECD countries spend an average of 1.7 times more per tertiary student than per primary student, Turkey spends three times more and has the highest ratio among OECD countries7 (OECD, 2014b). In terms of quality of teaching, there have been improvements in performance and equity metrics. Out of 39 countries that participated in the OECD Program for International Student Assessment (PISA) in 2003 and 2012, Turkey, along with Mexico and Germany, improved both mathematics performance and levels of equity in education during the period (OECD, 2014b). Moreover, the average difference in performance between advantaged and disadvantaged students declined as a result of targeted expenditure policies. However, there are two issues that are worth mentioning. First, improvements demonstrated by PISA were not significant enough to raise Turkey’s international academic ranking. In 2012, Turkey ranked 44th, 42nd and 43rd out of 65 countries in mathematics, science and reading, respectively. Second, important challenges remain in terms of increasing overall level of teacher qualifications and investing in the quality of teaching. A growing body of research suggests that teacher effectiveness outweighs effects of class size and heterogeneity as a determinant of differences of student learning (Sanders and Rivers, 1996). Since the late 1990s, countries such as the US, Norway, Austria, Denmark and Germany have introduced reforms aimed at increasing the quality of teaching. These reforms included various policies ranging from teacher recruitment and certification, continuous teacher learning and professional development, rigorous standards for teaching, and compensation and teaching salary equity. 325

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In terms of teacher recruitment and preparation, Turkey faces serious challenges: teachers in Turkey, by international standards, have substantially less education (in terms of number of teachers who hold master’s or PhD degrees), less pedagogical training, and fewer teaching experiences (WB, 2011). Moreover, recent research suggests that the teaching profession in Turkey does not enjoy high prestige (EC, 2013). On the one hand, compensation has been quite low. Despite the 25 percent increase in salaries between 2008 and 2012, salary cost of teachers is still much lower than the OECD average. In 2012, while the OECD average for upper secondary was US$3,212, it was US$1,706 in Turkey – higher than Hungary, Estonia, Chile, Slovak Republic and Mexico (OECD, 2014b). Indeed, in a recent study when asked about the types of change that are most likely to make the teaching profession more attractive, Turkish teachers selected “higher salaries” (EC, 2013: 45). On the other hand, there has been a clear deterioration in the working conditions such as increases in the weekly workload of teachers in Turkey (EC, 2013) and higher pupil-teacher ratios. Heavy workload combined with lower social status and low compensation has discouraged high performing students from selecting the teaching profession. Extensive investments in teacher preparation, improvements in working conditions, and higher salaries could increase the prestige of the teaching profession and hence make careers in teaching more attractive to good students. Growing concerns with low quality teaching and criticisms about the limited nature of reforms in terms of changing the governance mechanisms in the education system led to a new wave of reforms in the third term of the AKP. Since 2011, the structure of the Ministry of National Education was reorganized. New cadres were brought in, performance management was introduced, and private investments were encouraged by subsidizing private schools and the acquisition of school buildings via public-private partnerships (S¸as¸maz, 2013). It was in this period that more emphasis was put on preparing human capital for the requirements of a knowledge economy. Furthermore, a major reform was introduced in 2012 with the highly contested “4+4+4” law. This law changed the starting age for primary school students from 72 months to 60–69 months. It also reorganized compulsory education into 4 years of primary education and 4 years of secondary education in middle schools and religious (imam-hatip) middle schools, and introduced elective courses in religion, mathematics and sciences, and launched mandatory secondary education (high schools). However, the law excluded proposals to introduce free and compulsory early childhood education programs and to extend vocational education into secondary education. Some critics highlighted the shift to a value-based education system where the teaching of religion and religious middle schools were introduced to the mainstream education system. Others drew attention to the negative consequences of this new “4+4+4” system on gender equality because of the law’s potential for limiting educational opportunities for females (Kader, 2012). Similar to the health care reform, major social actors are excluded from policy making, and the views of main providers of education – the teachers – are not seriously incorporated in the policy debate. Furthermore, improving quality and investing in the teaching workforce remain crucial challenges for Turkish education system. Introducing improvements in teacher education, providing opportunities for continuous professional development, improving the working conditions and salaries, and expanding support to teachers facing difficulties are important components of improving quality in the education system. In addition, possible negative consequences of privatization trends and persistent inequalities in the system should be monitored carefully.

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Gender equality and the future of the Turkish welfare state system The education of women has a critical role in human capital development. Education empowers women, and empowerment is passed on to children as higher female education reduces the fertility rate and improves the nutrition, education and health of children. In the United Nations Development Programme’s (UNDP) Human Development Report in 2013 Turkey was ranked 69th out of 187 countries on the Human Development Index. However, it ranked as low as 118th in Gender Development Index, yielding a worrisome picture for Turkey. Increasing gender inequality is a fundamental problem for Turkey. The social security system in Turkey is based on the traditional presumption that women are dependent on men who are considered the primary breadwinners in the family. This structure reproduces the existing gender gaps, which in turn causes the social security system to fail in human capital development. The welfare regime in Turkey has been in rapid transformation in the last decade with the rise of neoliberalism and neo-conservatism, during which familialism and clientelism have become the main characteristics (Bug˘ ra, 2012). In line with Islamic characteristics of the ruling party, the secondary position of women in the society has been reinforced. Also, the traditional mode of social aid and services has been replaced with the Islamic traditions of charity, providing social aid not based on citizenship by means of official state channels, but via municipalities and/or religious NGOs with biased targeting mechanisms. The current ruling Islamic party, AKP, identified itself as “conservative-democratic” and emphasized commitment to Western democratic values and Turkey’s cherished goal of economic and political integration into the European Union between 2002 and 2007. However, “particularly since 2007, patriarchal and moral notions and values, often framed by religion, have increasingly become dominant in the party’s rhetoric regarding the regulation of social and cultural domains, and even political and international relations” (Acar and Altunok, 2013: 14). In fact, it is now commonly perceived that the transformation towards an authoritarian mode of governance and incorporating Islamic norms and values has rapidly accelerated since the Gezi Protests took place in the summer of 2013. In the aforementioned first period and in line with EU recommendations, the government has implemented a set of reforms towards gender equality. Changes in the Civil Code (2001), the Labor Law (2003) and the Penal Code (2004) strengthened individual rights, equality between sexes and autonomy of persons, indicating a shift towards a more liberal approach with respect to social, economic and family relations (Dedeog˘ lu, 2012; Elveren, 2013). For example, with the new Civil Law, the concept of the husband as the “head of the family” was abolished, the status of husband and wife was equalized, and women’s unpaid labor in the family was recognized by statutes that provided equitable distribution of marital property upon divorce. In the same manner, the new Labor Law brought the principles of equal pay for work of equal value, promoted equal treatment of workers and protection for pregnant and breastfeeding women or women who recently gave birth. Also, the law recognized sexual harassment at the workplace for the first time and nondiscrimination against part-time workers. Further, in order to eliminate discrimination against women and to protect women’s autonomy over their bodies and sexuality, the Penal Code has been improved with more than 40 changes (Acar and Altunok, 2013). Although these improvements in the legislative structure promised gender equality, neither the social security system nor general active policy delivered this promise. It has been noted that the social security system based on the male bread winner model and the idea of “familialism” and having conflicting implementations in terms of gender equality would impair the possible

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positive impacts of the reform (Elveren, 2013). Elveren argues that because women are mostly entitled to a pension income through either their fathers or husbands, a social security system that does not recognize the gender inequalities in the labor market or confinement of the women in private sphere makes it harder to realize the equalizing and improving effects of those regulations in civil code or labor law. (Elveren, 2013: 41) He continues to argue that despite improvements such as the provision of universal health insurance, extension of the scope of maternity insurance, and permit of benefit to dependent girls via parents, “reforms are far from addressing the disadvantageous conditions of women neither in the family nor in the labor market” (Elveren, 2013: 41). The active policy, on the other hand, provided independent citizenship for women based on the sameness principle while simultaneously securing women’s traditional role in the family (Dedeog˘ lu, 2013). Dedeog˘ lu notes that women’s actual position in society remains untouched, as there have been no affirmative policies to change women’s secondary position within society. The government has provided neither extensive care facilities, nor employment incentives for women. (Dedeog˘ lu, 2013: 12) In other words, the government promoted conservative values alongside the legal changes with respect to the EU gender equality policy that are destined to remain on paper, or simply just benefit white-collar women, who populate only a small portion of Turkish society (Dedeog˘ lu, 2013; Elveren, 2013). In short, gender inequality is a severe problem in Turkey. Although there has been some improvement on the legal context in favor of women in upper strata, gender inequality has been perpetuated with active policies.

Conclusions This chapter summarized the drastic changes introduced to the Turkish welfare system since the early 1980s. On the one hand, reforms in the health care system expanded access and reduced inequalities among the insured citizens. Similarly, in education, access to primary education improved, expenditure on education increased and there were some improvements in gender parity, especially in secondary education. However, at the same time, out-of-pocket expenditures have increased and the private sector was encouraged in both education and health care. Interestingly, addressing regional inequalities and improving quality of service have emerged as serious challenges in both sectors of the Turkish welfare system. Investing in health care and education systems is a crucial aspect of human capital development as they ensure a healthy and productive workforce. Since it came to power in 2002, the AKP governments have recognized this, although priorities have shifted with time. Along with the pension reforms, health care was assigned a priority in the first and second AKP governments, whereas education has received more attention since 2011. An important aspect of the transformation in the welfare system, however, has been the exclusion of social actors in the policy making. Reforms in the pensions, health care system, and education system were drafted and implemented, often despite fierce opposition of major social actors such as unions, professional associations or other civil society organizations. Given that the provision of health care services 328

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and education depend on doctors and teachers, the overly centralized structure of policy making and implementation remain to be important impediments to the next stages of reforms, which still need to deal with improving quality and addressing inequalities. Gender equality can perhaps be considered the most interesting aspect of the transformation of the welfare regime in Turkey. As empowering women is one essential issue in development process in general, and in increasing human capital in particular, it is essential to understanding Turkey’s move towards “gender equality.” This move, however, has conflicting aspects. In contrast to the legal changes aimed towards gender equality on paper, familialism has emerged as the most remarkable characteristic of the welfare regime that has transformed with the rise of neoliberalism and neoconservatism. Although the current ruling party implemented a set of reforms towards gender equality in line with EU recommendations, these reforms have not been supported by either structural changes in social security system or active policies. In contrast to changes in the legal structure, the government has reinforced the idea of “familialism” to exacerbate women’s secondary position in society.

Notes 1 See Dedeog˘ lu and Elveren (2012, 2013) for comprehensive discussions on the gendered dimension of the Turkish welfare regime and social policy. 2 Some have argued that the very slow pace of transitions to new rules (i.e. minimum retirement age) is a major shortcoming of this reform and needs to be reconsidered, which in turn also raises intergenerational equity concerns and the overall pension system in Turkey does not address the poverty and equity issue in the wider population (Brook and Whitehouse, 2006). They also point out that Turkey has the lowest means-tested pension in the OECD, the cost of raising the basic pension to the absolute poverty line, indeed, is relatively small (Brook and Whitehouse, 2006: 21), and reducing the social security contribution should be a priority in order to reduce the size of informal sector, which appears as a vital problem faced by the social security system. 3 See Elveren and Hsu (2007), Bozkus¸ and Elveren (2008), Elveren (2008b), S¸ahin et al. (2010), Elveren (2013) and S¸ahin and Elveren (2014) for the discussion on the different aspects of the gender dimension of the system. 4 A significant decline occurred in the gender gap due to the educational reform of 1997 which increased compulsory schooling from 5 to 8 years and the 2012 reform from 8 to 12 years. 5 In fact, almost half of these universities run a kind of “school of education” system. However, the lack of a national system of standards and accreditation for universities and departments is the main factor that contributes to decrease in quality. On the other hand, education governance is highly centralized in Turkey. For example, many teachers expressed their concern about the new curriculum introduced in 2004, for which they became involved at the implementation stage (UNESCO, 2014: 221). 6 In fact, it is noted that there has been growing tendency among the top educated population to migrate due to extending Islamic/authoritarian atmosphere in the country (Kınıkog˘ lu, 2014). 7 This is not due to relatively lower expenditure on primary students, since Turkey devotes higher share of public expenditures on tertiary education than OECD does in average terms (i.e. 37.8% and 24.5%, respectively) (OECD, 2014b).

References Acar, F. and Altunok, G. (2013), The “Politics of Intimate” at the Intersection of Neo-Liberalism and NeoConservatism in Contemporary Turkey, Women’s Studies International Forum,Vol. 41, Part 1, pp. 14–23. Ag˘ artan, T. I. (2008), Turkish Health System in Transition: Historical Background and Reform Experience, dissertation, State University of New York, Binghamton. Akinci, F.; Mollahalilog˘ lu, S.; Gürsöz, H., and Ög˘ ücü, F. (2012), Assessment of the Turkish Health Care System Reforms: A Stakeholder Analysis, Health Policy,Vol. 107, No. 1, pp. 21–30. Aran, M. and Roks, C. (2014), Turkey on the Way of Universal Health Coverage through the Health Transformation Program (2003–2013). World Bank Health, Nutrition, and Population (HNP) Discussion Paper. Washington DC: World Bank. 329

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Arın, T. (2002), The Poverty of Social Security: The Welfare Regime in Turkey, in N. Balkan and S. Savran (eds.), The Ravages of Neoliberalism: Economy, Society and Gender in Turkey, Nova Science: New York. Baris, E.; Mollahalilog˘ lu, S., and Aydin, S. (2011), Health Care in Turkey: From Laggard to Leader, British Medical Journal,Vol. 342, pp. 579–582. Bozkus¸, C. and Elveren, A. Y. (2008), An Analysis of Gender Gaps in the Private Pension Scheme in Turkey, Ekonomik Yaklas¸ım,Vol. 19, No. 69, pp. 89–106. Brook, A.-M. and Whitehouse, E. (2006), The Turkish Pension System: Further Reforms to Help Solve the Informality Problem, OECD Economics Department Working Papers, No. 529, OECD: Paris. Bug˘ ra, A. (2012), The Changing Welfare Regime of Turkey: Neoliberalism, Cultural Conservatism and Social Solidarity Redefined, in S. Dedeog˘ lu and A. Y. Elveren (eds.), Gender and Society in Turkey: The Impact of Neoliberal Policies, Political Islam and EU Accession, IB Tauris: London. Bug˘ ra, A. and Keyder, Ç. (2003), New Poverty and the Changing Welfare Regime of Turkey, UNDP: New York. ——— (2006), The Turkish Welfare Regime in Transformation, Journal of European Social Policy, Vol.  16, No. 3, pp. 211–228. Cangöz, M. C. (2010), Redistribution of Power ad Status Through Public Finance: The Case of Turkey (1980–2003), Republic of Turkey Ministry of Finance Strategy Development Unit Issue No: 2010/401. Cos¸ar, S. and Yeg˘ enog˘ lu, M. (2009), The Neoliberal Restructuring of Turkey’s Social Security System, Monthly Review, April. Dedeog˘ lu, S. (2009), Es¸itlik mi Ayrımcılıkmı? Türkiye’de Sosyal Devlet, Cinsiyet Es¸itlig˘ i Politikalarıve Kadın I˙stihdamı, Çalıs¸mave Toplum,Vol. 2, pp. 41–54. ——— (2012), Gender Equality Policies and Female Employment:The Reforms in EU Accession Process, in S. Dedeog˘ lu and A. Y. Elveren (eds.), Gender and Society in Turkey:The Impact of Neoliberal Policies, Political Islam and EU Accession, IB Tauris: London. ——— (2013), Veiled Europeanisation of Welfare State in Turkey: Gender and Social policy in the 2000s, Women’s Studies International Forum,Vol. 41, Part 1, pp. 7–13. Dedeog˘ lu, S. and Elveren, A. Y. (eds.) (2012), Gender and Society in Turkey: The Impact of Neoliberal Policies, Political Islam and EU Accession, IB Tauris: London. ——— (eds.) (2013), Special Issue: Gendering Social Policy and Welfare State in Turkey, Women’s Studies International Forum,Vol. 41, Part 1, pp. 1–88. EC, European Commission (2013), Study on Policy Measures to Improve the Attractiveness of the Teaching Profession in Europe,Vol. 1, European Union: Luxembourg. EGM (Pension Monitoring Center) (2014), www.egm.org.tr. Elveren, A. Y. (2003), Bireysel Emeklilik Sisteminin Makro Ekonomik Etkileri [Macroeconomic Effects of the Individual Pension System], I˙¸sveren Dergisi,Vol. 41, No. 8, p. 23. ——— (2008a), Social Security Reform in Turkey: A Critical Perspective, Review of Radical Political Economics,Vol. 40, No. 2, pp. 212–232. ——— (2008b), Assessing Gender Inequality in the Turkish Pension System, International Social Security Review,Vol. 61, No. 2, pp. 39–58. ——— (2013), A critical analysis of the pension system in Turkey from a gender equality perspective, Women’s Studies International Forum,Vol. 41, Part 1, pp. 35–44. Elveren, A. Y. and Hsu, S. (2007), Gender Gaps in the Individual Pension System in Turkey, University of Utah, Department of Economics, Working Paper, No. 6, 2007. Erdog˘ du, S. (2006), Sosyal Politikada Deg˘ is¸imve Sosyal Güvenlik Reformu, Mülkiye, Vol. 30, No. 252, pp. 211–236. Esping-Andersen, G. (1990), The Three Worlds of Welfare Capitalism, Polity: Cambridge. Ferreira, F.H.G. and Gignoux, J. (2010), Inequality of Opportunity for Education:The Case of Turkey, State Planning Organization of the Republic of Turkey and World Bank Welfare and Social Policy Analytical Work Program, Working Paper, No. 4, Ankara, Turkey. Gough, I. (1996), Social Assistance in Southern Europe, Southern European Society & Politics, Vol. 1, No. 1, pp. 1–23. Günal, A. (2008), Health and Citizenship in Republican Turkey: An Analysis of the Socialization of Health Services in Republican Historical Context, dissertation, Bog˘ aziçi University, Turkey. 330

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Hamzaog˘ lu, O. and Yavuz, C. I. (2006), Sag˘ lıkta AKP’li Dönemin Bilançosu Üzerine, Mülkiye, Vol.  30, No. 252, pp. 275–296. ILO, (1996), Social Security and Health Insurance Reform Project, Social Security Final Report, Geneva, ILO/TF/ Turkey. Kader, (2012), Question from Kader to President Abdullah Gul About 4+4+4, http://www.ucansupurge.org/turkce. Kalaycıog˘ lu, S. (2006), Dynamics of Poverty in Turkey: Gender, Rural/Urban Poverty, Social Networks and Reciprocal Survival Strategies, in M. Petmesidou and C. Papatheodorou (eds.), Poverty and Social Deprivation in the Mediterranean Area:Trends, Policies and Welfare Prospects, Zed Books: London. Kalaycıog˘ lu, S. and Rittersberger-Tılıç, H.(2000), Intergenerational Solidarity Networks of Instrumental and Cultural Transfers Within Migrant Families in Turkey, Ageing and Society,Vol. 20, No. 5, pp. 523–542. Kınıkog˘ lu, S. (2014), Seküler Hicret, Radikal, November 4. MOH, Ministry of Health (2003), Türkiye Sag˘ls¸kta Dönüs¸üm Projesi Konsept Notu, Ministry of Health: Ankara. ——— (2010), Health Transformation Program in Turkey: Progress Report, No. 807, Ministry of Health: Ankara. OECD (2013), OECD Health Statistics, http://dx.doi.org/10.1787/health-data-en. ——— (2014a), OECD Health Statistics, http://www.oecd.org/els/health-systems/oecd-health-statistics2014-frequently-requested-data.htm. ——— (2014b), Education at a Glance 2014: OECD Indicators, OECD Publishing, http://dx.doi. org/10.1787/eag-2014-en S¸ahin, S¸. and Elveren, A. Y. (2014), A Minimum Pension Guarantee Application for Turkey: A Gendered Perspective, Journal of Women, Politics & Policy,Vol. 35, No. 3, pp. 242–270. S¸ahin, S¸.; Rittersberger-Tılıç, H., and Elveren, A. Y. (2010), The Individual Pension System in Turkey: A Gendered Perspective, Ekonomik Yaklas¸ım, Vol. 21, No. 77, pp. 115–142. Sanders, W. L. and Rivers, J. C. (1996), Cumulative and Residual Effects of Teachers on Future Student Academic Achievement, University of Tennessee: Knoxville. S¸as¸maz, A. (April, 2013),To Which Direction Does the Education Policy of Ak Party Change? Vol. 2, No. 2, pp. 40–57, Centre for Policy and Research on Turkey, http://researchturkey.org. S¸ener, G. (2006), Classification of Welfare Regimes Using Cluster Analysis: Where Does Turkey Stand? thesis, Bog˘ aziçi University, Turkey. Sulku, S. N. and Abdioglu, Z. (2014), Cepten Yapilan Egitim Harcamalarinin Hanehalki Gelirine Mali Yuku: Turkiye Icin Istatistiksel Bir Analiz, Yonetimve Ekonomi Arastirmalari Dergisi, No. 24, 338–355. Tatar, M.; Mollahalilog˘ lu, S.; Sahin, B.; Aydın, S.; Maresso, A., and Hernández-Quevedo, C. (2011), Turkey Health System Review, Health Systems in Transition,Vol. 13, No. 6, pp. 1–186. Tekneci, P. D. (2014), Evaluating Research Performance of Turkish Universities, dissertation, Middle East Technical University, Ankara, Turkey. TurkStat (The Turkish Statistical Institute) (2014), www.tüik.gov.tr. UNESCO (2014),Teaching and Learning: Achieving Quality for All: Gender Summary, EFA Global Monitoring, http://unesdoc.unesco.org/images/0022/002266/226662E.pdf. Vujicic, M.; Sparkes, S., and Mollahalilog˘lu, S. (2009), Health Workforce Policy in Turkey: Recent Reforms and Issues for the Future Health, Nutrition and Population (HNP) Discussion Paper, World Bank: Washington, DC. WB, World Bank (2003), Turkey Reforming the Health Sector for Improved Access and Efficiency, Report No. 24358-TU, World Bank: Washington, DC. ———(2006a), Turkey Public Expenditure Review, Report No: 36764-TR, World Bank: Washington, DC. ——— (2006b), Turkey: Labor Market Study, World Bank: Washington, DC. ——— (2011), Improving the Quality and Equity of Basic Education in Turkey: Challenges and Options, World Bank: Washington, DC. WHO (2008), The Global Burden of Disease, http://www.who.int/healthinfo/global_burden_disease/2004_ report_update. ——— (2011), Mental Health Atlas, Department of Mental Health and Substance Abuse, http://www.who. int/mental_health/evidence/atlas. Yenimahalleli-Yas¸ar, G. (2008), Türkiye’de 1980 Sonrası Sag˘ lık Politikalarında Gözlenen Neoliberal Dönüs¸ümve Sonuçları Üzerine Deg˘ erlendirmeler, Mülkiye,Vol. 32, No. 260, pp. 157–192. 331

20 The Israeli welfare state system With special reference to social inclusion John Gal

A Mediterranean welfare state, the Israeli welfare state system consists of a relatively comprehensive system of social protection institutions that have developed since Israel’s establishment in 1948. Although structured originally along the lines of the Beveridgean model and inspired early on by social-democratic thinking, the effectiveness of the Israeli welfare state has been limited, particularly in the last three decades. Operating in a context of ongoing conflict with Israel’s neighbors and influenced strongly in recent years by the neoliberal discourse, the Israeli welfare state has struggled to deal adequately with growing inequality and poverty and with the integration of two major social groups – Arab citizens and ultraorthodox Jews.

Israel as a Mediterranean welfare state system Situated in the Middle East, Israel is geographically a small country with a population of 8.2 million citizens. Of these, just over 20 percent are Arab citizens, and the remainder are Jews. Ultraorthodox Jews comprise approximately a tenth of the overall population. An immigration state established to provide a safe haven for Jews after the Holocaust, a large proportion of the Israeli population has always been Jewish immigrants. Indeed legislation guarantees Jewish immigrants the immediate and virtually unconditional right to citizenship and to diverse social rights.While immigration has continued unabated since the establishment of the state, the last major influx of Jewish immigrants occurred in the early 1990s, when over a million immigrants from the former Soviet Union arrived in the country (Gal and Oser, 2011). In addition, recent years have seen a marked growth in the number of non-Jewish labour migrants and of asylum seekers in Israel (Shamir and Mundlak, 2013). There are estimated to be 250,000 labour migrants and asylum seekers currently in the country. Israel occupies territories that were conquered during the 1967 Six-Day War; 4.5 million Palestinians reside in these areas (PCBS, 2014). Social welfare institutions operated by the autonomous Palestinian Authority and by international agencies, such as UNRWA (United Nations Relief and Works Agency for Palestine Refugees), provide rudimentary social welfare to the Palestinian inhabitants of the Occupied Territories and, as such, they are not incorporated in the Israeli welfare state (Safadi and Easton, 2014). Exceptions to this are the Palestinian residents of 332

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East Jerusalem, which was annexed by Israel in 1980, and who are thus formally integrated into the Israeli social protection institutions. An advanced market economy with a particularly thriving high-tech sector, Israel has a relatively high GDP per capita, US$31,500 in 2012, placing it among the 30 highest income nations in the world. Over most of the last decade the nation has also enjoyed comparatively high growth rates and low unemployment levels, and it was only minimally affected by the Great Recession of the late 2000s and early 2010s (BOI, 2013a). At the same time, there are very wide remuneration gaps within the labour market, particularly between employees and managerial staff in the financial and high-tech sectors and semi-skilled or unskilled workers. In addition, tax policy in the last two decades has emphasized lowering tax rates and more indirect taxation. These have had major implications for efforts by the welfare state to deal effectively with inequality and poverty (Metzer, 2014). Despite its relative affluence, Israel shares with other nations included in the extended family of Mediterranean family of welfare states a number of historical processes that have implications for the workings and structure of its welfare state (Gal, 2010). Similar to other Mediterranean welfare states, Israel underwent a late process of industrialization, which took off primarily during the late 1950s and early 1960s. Its economy is still characterized by labour market rigidity and segmentation that distinguishes between insiders, who are protected within a formal economy, and outsiders, who constitute a relatively unprotected temporary or informal segment of the labour market (Shalev, 1992; Mundlak, 2007).This has contributed to the emergence of a significant informal economy in Israel (as is the case in other Mediterranean nations) with obvious implications both for the protection of workers within these sectors of the labour market and for the state revenues crucial for welfare state financing. The fact that Israel is a young parliamentary democracy established in the wake of colonial rule and existing in the shadow of a protracted conflict with its neighbors and deep ethnic and religious divides, has weakened the democratic structure of the unitary state in Israel. This has resulted in a political system that has been crisis-prone and which is often ineffective (Diskin, 2003). Indeed the state in Israel, as is the case in other Mediterranean welfare states, is both stronger and weaker than that in other non-Mediterranean welfare states. While low levels of welfare provision and institutions highly vulnerable to partisan pressure are evidence of its weakness, the state has sought to play a major, although often only partially successful, role in regulating most spheres of social life and in controlling major social and economic institutions (Nachmias and Arbel-Ganz, 2005). In all Mediterranean welfare states, and Israel among them, these characteristics have limited the resources available for funding comprehensive social protection system and have created difficulties in the administration of established programs. Israel also shares with other Mediterranean welfare states three broad cultural attributes that appear to have had a marked impact upon welfare state formulation – the family, religion and the persistence of clientelistic-particularistic forms of welfare. The family continues to play a dominant role in Israeli society and it, rather than the welfare state, remains a major source of welfare provision, particularly with regard to care for children and for elder persons (LewinEpstein et al., 2000; Litwin, 2009). The lack of a clear division between state and religion, high levels of religiosity and the activist role of clerical parties in the political system have led to the involvement of religion in the welfare discourse and in social policy and have ensured state support for faith-based institutions in the education, social welfare and health fields (Zehavi, 2012, 2013; Feldman, 2013). Religiosity and the centrality of the family have together contributed to high levels of fertility among both the Jewish and the Arab Muslim populations of Israel. Finally clientelism still plays a major role in the social welfare system, primarily in the sense that the state employs social welfare as a vehicle through which greater support is provided to groups 333

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identified with state values – these include Jewish immigrants, disabled veterans and the families of fallen soldiers as well as individuals persecuted abroad for their Zionist activities (GamlielYehoshua and Vanhuysse, 2010; Shalev, 2010).

A historical perspective of welfare state development in Israel The foundations for the establishment of a welfare state in Israel were initially laid during the British Mandate of Palestine between 1920 and 1948. These included efforts by the Histadrut trade union federation to establish social insurance programs for its members, by Zionist philanthropic organizations to establish health and education institutions, and by the Department of Social Services affiliated with the Jewish community to create a network of local social welfare bureaus. Following the end of British Mandatory rule, initial efforts to establish social protection institutions in Israel were undertaken immediately after independence in 1948. The prestate social welfare institutions continued to operate while new infrastructures were established. Despite the need to deal with an ongoing military conflict and mass immigration during much of its short history, Israel managed to establish a welfare state in the early 1970s. To a large degree the Beveridge model, with its emphasis on universal, social insurance–based benefits, served as the fundamental model for structuring major social security programs in the country (Doron, 1994). In addition, categorical noncontributory universal benefits have traditionally played a major role in the Israeli welfare state, these serving as a means of compensating victims of the Arab-Israeli conflict and of dealing with immigrants’ needs and their integration into society. Finally, a nationally administrated social assistance program was introduced in the early 1980s. These social security infrastructures were complemented by the network of local social welfare agencies and institutions, a national health insurance system based upon nonprofit health funds and the state, a comprehensive educational system,1 mass construction of state housing (primarily during early periods of mass immigration), and attempts at labour market integration of immigrants and the poor. The Israeli welfare state appeared to be moving towards a more social-democratic model during its formative period in the mid-1970s, with the introduction of more universal services, greater state involvement in welfare, wider coverage of needs, and the introduction of more wage-related and better indexed benefits. However from the mid-1980s onwards efforts to privatize social services, to target benefits, and to cut social spending have been common (Doron, 2001). The initial years of the 1990s saw a temporary reversal of some of these trends. This was a consequence of the efforts by a center-left government to deal with the absorption of the mass immigration of Jews from the former Soviet Union during that period and of political pressure to address acute social needs, such as those of low-income large families, both Jewish and Arab, and of single mothers (Helman, 2011). These steps were also facilitated by the budding peace process and by strong economic growth. Yet by the end of that decade, a period of recession and renewed neoliberal political dominance led to invigorated efforts to rein in social expenditure, to privatize social welfare, health and education services, and to adopt stringent programs intended to move benefit recipients into work. These have continued, to a lesser extent, in the period afterwards. Indicative of this is the level of public social expenditure, which has remained a particularly low proportion of GDP in Israel over the last decade. As can be seen from Figure 20.1, social spending is currently 15.8 percent of GDP, lower than that of virtually all other welfare states. Even when education outlays and private social expenditures are taken into account, social spending in Israel is still below the accepted level in OECD countries (Shalev, Gal and Azary-Viesel, 2013). 334

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20

15

10

5

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Israel

OECD mean

Figure 20.1 Social protection as a percentage of GDP in Israel and the OECD mean (2000–2013) Source: OECD, SOCX database, 2014.

The social security system The Israeli social security system provides social protection, primarily through cash benefits, that covers a wide range of contingencies and social risks. Administered by the state’s National Insurance Institute and a number of other government ministries (Defense, Finance, Immigration Absorption and Religious Affairs) as well as by for-profit and non-profit organizations (primarily in the case of occupational pensions and long-term care), the system seeks to provide a safety net for individuals and families lacking adequate sources of income or faced with unforeseen expenses due to a variety of circumstances.The various social security system programs focus on poverty reduction, distribution of individual income across the life span, participation in additional outlays such as child-rearing, the reintegration of the unemployed and disabled into the labour market, compensation for loss or damage, redistribution, and enhancing gender equality. In 2013, public expenditure on this system comprised the lion’s share of social expenditure in Israel, consisting of 6.4 percent of GDP. Notably, the last decade and a half has seen continuous decline in the proportion of GDP devoted to social security, a result of cuts in welfare spending (NII, 2014). As is the case in most welfare states, benefits for elder persons comprise the largest single social security expenditure. While the elder persons are a comparatively small proportion of the Israeli population (currently 10.4%) and their income is based, to a large extent, on occupational pensions administered by non-profit and for-profit institutions, 44 percent of all public social security spending is devoted to this age group. In addition to a universal social insurance tier which offers relatively limited benefits to all the elder persons, an income-tested second tier provides elder persons lacking occupational pension income or other additional sources of income (currently 22% of elder households) with a top-up that brings their total income to just below 335

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the poverty line. A recommendation by a National Committee to Combat Poverty in early 2014 to raise the level of state social security benefits so as to ensure an income above the poverty line for the elder persons was adopted in early 2016, and this has increased somewhat the generosity of the second tier benefit. At present, 22.7 percent of elder households live in poverty (NII, 2014). Following the adoption of government regulations in the mid-2000s, which mandate occupational pension coverage of all employees (Gavious et al., 2009), it is expected that the proportion of elder poor will decline in the future. A second major social security program administered by the National Insurance Institute and intended for the elder persons is the Long-Term Care Insurance Program, which provides home-based care services for frail elder persons (Chernichovsky et al., 2010). Although families are still explicitly perceived as the prime source of support for frail elder persons (Loewenstein and Daatland, 2006), since its enactment in 1986 this program has provided frail elder persons with supplementary funding for home-based care for a number of hours weekly. This care is supplied by for-profit or non-profit agencies. Over the last decade, this program has also provided partial funding for the full-time home care of frail elder persons by foreign caregivers, primarily from the Philippines. Of the 156,600 elder individuals currently eligible for support from this program (17% of the elder population), it is estimated that a third employ full-time foreign caregivers (Asiskovitch, 2013). While this relieves families, particularly women, of the need to provide the care directly, it also places a major financial burden on them. Although institutional care for the elder persons exists, it is generally provided by for-profit organizations and covers a very limited proportion of the elder population (Natan, 2011). State support for institutional care for the elder persons is based on means-testing, and funding is extremely restricted. Families with children are another major focus of the social security system. The major programs include child benefits, maternity benefits, unemployment insurance and social assistance (termed “income support”). Most of these programs are universal, and the benefits often take the form of wage replacement, in that they are linked partially or fully to previous wages. This is particularly the case for maternity benefits and unemployment insurance which are based on social insurance principles, while child benefits are categorical and social assistance is meanstested. In most cases, the benefit levels in these programs are low and they have been subject to cuts or limitations to access in recent years. In addition to these, an earned income tax credit targeting low-income working families was introduced in 2008. Child benefits are universal benefits paid directly to all families with children under the age of 18. They have been the target of particularly dramatic cuts over the last decade and they are currently set at the equivalent of US$37 per child per month regardless of the number of children in a family (NII, 2014). Similarly access to unemployment insurance has been significantly curtailed by lengthening the qualification period, reducing the maximum duration of benefit receipt and slashing the level of benefits (Gal, 2005). Social assistance has also been the subject of major changes over this period in an effort to bring down the number of recipients of this benefit (Monnickendam, 2011). During much of the last decade, eligibility in parts of the country was contingent on participation in a recently aborted welfare-to-work scheme (Maron, 2014). Benefit levels were also cut dramatically, primarily for families with children. Indeed current benefit levels for families are often significantly lower than the official poverty line (NII, 2014). One result of these changes in the program was a drop in benefit recipient levels from 140,000 in 2005 to 104,000 in 2013. The Earned Income Tax Credit (EITC) is the most recently introduced cash transfer program for families with children in Israel. It was envisioned by policy makers as a policy tool that would be more effective in encouraging labour market participation of the poor than existing social security programs. Adopted in 2008 on a trial basis, and extended since, it offers families 336

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with children a tax credit that can reach between 12 and 17 percent of the average wage, depending upon gender, family size and income level. The eligible population is nearly a tenth of all wage-earners but take-up of the tax credit has been only 50 percent (BOI, 2013b). This can be linked to administrative obstacles and to the fact that the amount of the credit is relatively limited in comparison to those in other welfare states with similar programs. Indeed spending on the EITC has been small, comprising only 0.07 percent of GDP in 2013. Finally people with disabilities are a major target of social security programs. Three major categorical disability programs exist in the Israeli welfare state. The largest of these is a catchall categorical program that offers cash benefits to disabled individuals not eligible for support from other existing programs for the disabled. Following two major sit-in strikes by the disabled at the beginning of the 2000s, benefit levels for recipients of support from this program, and particularly the severely disabled, were increased and efforts to facilitate labour market integration were enhanced (Rimmerman and Herr, 2004). These developments, and cuts in the social assistance program, appear to have led to accelerated growth in the number of disability benefit recipients which reached double that of natural population growth in Israel (Pinto, 2014). Alongside this program, a more generous work accident disability program has existed since the early 1950s. This offers wage-replacement benefits to the victims of accidents or diseases linked to the workplace. Finally a third disability program provides particularly generous benefits and services to disabled veterans. Administered by the Ministry of Defense, this program offers benefits that have been estimated to be over three times as generous as those available to recipients of support by the regular disability program (Gal, 2001; Mor, 2006).

Social welfare services An integral part of the Israeli welfare state are social welfare services. These services are provided by social workers in local social welfare agencies and additionally in institutions funded or administered by the Ministry of Welfare and Social Services. While administered by local authorities, municipal social welfare services are regulated and funded primarily by central government (75% of the cost) with the participation of the local authorities (25%). They offer personal social services to a wide range of at-risk populations, which include children and youth; dependent elder persons; families in crisis; people with intellectual, developmental or physical disabilities; people with issues of substance abuse; and the homeless. In 2013, 464,600 households were served by local social welfare agencies. These comprised 20.6 percent of all households in Israel (MWSS, 2014). Unlike most other welfare states, social work enjoys a virtual monopoly over the provision of social welfare services in Israel. Professionalization of social work, widespread unionization, the profession’s solid academic status and the adoption of a social work law in 1996 have been factors in this process (Weiss et al., 2004). As a result, all managerial and decision making positions in the social welfare sector and any roles in child welfare, corrections and casework are earmarked for licensed social workers. Similarly, social workers in Israel are playing a growing role in social policy formulation (Weiss-Gal, 2013). Recent decades have seen marked changes in the provision of personal social services in Israel. These include an accelerated privatization process, growing contracting out of services to non-profit and for-profit providers and a movement towards more temporary employment of social worker staff in local government agencies (Bar-Nir and Gal, 2011). Dramatic cuts in funding for social welfare services in the first half of the 2000s were reversed partially during the second half of the decade. Similarly, efforts to introduce reforms in the functioning of these 337

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services are being undertaken, and there is a growing emphasis on holistic efforts to move families from welfare to the labour market. Nevertheless, a growth in the number of service users and of mandatory tasks, which led to understaffing of agencies in addition to the low wages paid to social work employees, have led to dissatisfaction among service users (Krumer-Nevo and Barak, 2007) and simmering work relations in this sector (Preminger, 2013).

The health care system Israel has traditionally offered state-subsidized and regulated health services to its population. This system, which was based primarily on a trade union–affiliated health fund, which operated prior to the establishment of the state, a number of other smaller (mainly middle-class-oriented) health funds, and a government health system that encompassed general hospitals, mental health and infant health services, achieved satisfactory levels of health provision and results. These are still reflected in life expectancy that is higher than the OECD average and infant mortality rates that are on par with the OECD average (Chernichovsky and Regev, 2013). Funding difficulties, issues of equity in access to services, and a lack of full coverage of the population led to legislation adopted in the first half of the 1990s which established a fully universal health insurance system in Israel (Chinitz, 1995). This system comprises of full mandatory health coverage of the entire population that includes general preventive, acute and chronic care delivered in the community and in hospitals. Care is provided by four health funds and by state facilities. Funding is through a mandatory income-based tax that the state distributes based on a capitation formula to the four health funds that compete within a quasi-market to provide health services. The state sets a basic package of health services to be provided by the health funds, and that is updated annually. Additional services not included in the basic basket can be provided by the health funds or received by recipients through supplementary private insurance, which is offered primarily by the health funds.This type of insurance is widespread and currently encompasses 80 percent of the population (Chernichovsky, 2013). In the years since the adoption of the National Health Insurance Law, continued increase in demand for health care has led to amendments to the law and to the rapid privatization of key elements within the health care system. One consequence of this is a marked growth in outof-pocket spending (Mizrahi and Cohen, 2012). State policy has led to a decline in the proportion of public sources in health expenditure and a rapid increase in private spending. National health spending comprises 7.9 percent of GDP. Currently Israeli public spending comprises 60 percent of the total national health expenditure, down from 67 percent when the National Health Insurance Law was introduced in 1995. Both the overall spending level and the public component of this are below the spending levels in most other welfare states (Chernichovsky and Regev, 2013). Privatization of the health care system and a growing demand for out-of-pocket payments for services and medication has had dramatic implications for equity within the health services and for access to services. A flourishing private health sector has developed, and accessibility to high quality health services has become more dependent upon income and private health insurance coverage. Findings from a number of studies indicate that these developments have had regressive implications for low-income households (Navon and Chernichovsky, 2012) and have led to significant proportions of the population giving up on dental treatment (42%), medical treatment (13%) or medication (11%) due to a lack of sufficient income (ICBS, 2013). 338

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Labour and housing policy In the initial two decades following its establishment, the Public Employment Service, wellfunded and state-operated vocational training and an extensive public works program were crucial elements in integrating immigrants into the labour market in Israel. The social-democratic turn during the late 1960s and 1970s led to a greater emphasis on social protection for workingage individuals outside the labour market. The adoption of unemployment insurance in 1973 and of social assistance in 1980 exemplified this trend (Gal, 2005). Since the beginning of this millennium, increasing labour market participation and enhancing the income levels of low-wage workers have been once again underscored as major goals of Israeli policy makers, however, the policy tools have changed. Alongside steps to cut benefits perceived as creating work disincentives, such as child benefits, social assistance and unemployment insurance, the introduction of a controversial experimental welfare-to-work program in 2005 (Maron, 2014) and the adoption of the EITC were central planks in this effort. In addition to these, the Public Employment Service, enforcement of labour laws, in particularly minimum wage legislation, by the Ministry of Economy and state support for vocational training have remained institutional components in this effort. However, a severe lack of funding and chronic understaffing of these institutions have hampered their effectiveness. Finally the welfare state has sought to support labour market integration of members of the Arab and ultra-orthodox communities by contracting out diverse small-scale vocational training and work search initiatives to non-state service providers. Despite its overt commitment to increasing labour market participation and the income levels of low wage earners, resources devoted to active labour market programs by the Israeli government have been meagre. Reflecting a neoliberal economic approach, the dominant assumption has remained that limiting access to transfer payments and maintaining economic growth are the most effective routes to increased labour market participation and to combating poverty. As a result, public spending on active labour market programs in Israel is among the lowest among OECD countries (OECD, 2013). Housing has been another traditional focus of welfare state efforts in Israel, although here again policy tools have changed dramatically over time. During initial periods of mass immigration, Israel undertook major efforts to construct housing. Consequently, during the first three decades after statehood, the state constructed more than half of all housing units. Indeed until 1964, the proportion of state involvement exceeded 70 percent (Carmon, 2001).This effort sought not only to provide homes for immigrants but also to further the dispersion of the population to peripheral parts of the country. Much of this public housing effort was intended for purchase. Similarly, state financial support for housing was focused primarily on facilitating the purchase of housing with only a marginal focus on rent assistance. Housing policies changed following the election of a right-wing government in 1977 and welfare state contraction during the 1980s. State involvement in construction decreased significantly, with the exception of housing in Jewish settlements in the Occupied Territories. During the period, efforts within Israeli proper focused primarily on the renewal of public housing stock in low-income neighborhoods. The mass immigration from the former Soviet Union in the early 1990s necessitated renewed state intervention in the housing market. In contrast to past efforts to accommodate the housing needs of immigrants, government construction of housing was rejected with the focus now being placed on support for market solutions. Policies during this period sought to stimulate housing supply by offering generous incentives to developers and by addressing bottlenecks in the statutory planning system (Benchetrit and Czamanski, 2009). At the same time, the 339

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welfare state offered generous support to immigrants to finance mortgages. Political pressure by residents of low-income neighborhoods culminated in an additional policy change during the mid-1990s. The adoption of the Public Housing Law led to the sale of much of the remaining public housing stock to the rent-paying residents at greatly reduced prices (Asiskovitch, 2011). The high level of housing ownership in Israel, which is estimated to be 70 percent of households (Benchetrit and Czamanski, 2009), the rapid decline in direct state involvement in the housing market since the early 1990s, and a contraction of private construction during an economic downturn in the early 2000s led to an acute shortage of housing and to marked increases in housing prices during recent years. Recent state efforts to redress this have tended to focus on interventions in the free market through cuts in taxation on the purchase of housing, increased marketing of state-owned land to developers and financial support for mortgages.

Special focus: social inclusion Poverty and inequality remain a major problem in Israeli society and their levels underscore the Israeli welfare state’s failure to address them successfully. As can be seen in Figure 20.2, nearly 20 percent of families live in poverty and a third of children live in poor families.The proportion of families extracted from poverty through transfer payments and direct taxation has decreased from 50 to 39 percent over the last decade (NII, 2014). Inequality in terms of income (Gini coefficient) is 0.376. These poverty and inequality levels are among the highest in welfare states and on par with those in the US. Poverty is particular common among two sectors of the Israeli population – the Arab and the ultra-orthodox Jewish communities. Just over half of the families in both of these communities have disposable incomes below the poverty line.The combination of low levels of labour market participation and of wage income among members of the Arab and the ultra-orthodox communities in Israel and of unusually high fertility rates has created large pockets of social exclusion among them. Government efforts to increase social inclusion of members of these two communities and deal with the extremely high levels of poverty within them have focused primarily, 60 53.2

54.3

50 40 33.7

30 20

22.7

19.4 10 0

Ultra-orthodox

Arabs

Elderly

Children

Figure 20.2 Poverty levels of diverse population groups in Israel (2012) Source: National Insurance Institute (2014).

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over the last decade and a half, on labour market insertion. Cuts in social assistance benefit levels and in child benefits, a mainstay for the many large Arab and ultra-orthodox families, have been justified as a means by which labour market participation (and implicitly reductions in fertility rates) can be encouraged. Clearly, however, these cuts can also be interpreted as a relatively simple avenue to reduce welfare spending and as reflecting neoliberal thinking on welfare. Findings indicate that these cuts have led to increases in child poverty while their direct impact on fertility rates and labour market participation has been disputed (Schellekens, 2009; Toledano et al., 2009; Cohen et al., 2013). The Arab sector in Israel comprises 1.69 million citizens. Although there has been a sharp decline in the fertility rates of Arab women since the early 1970s, the Arab population in Israel is still characterized by a young population (the median age is 20) and by large families, with the average size of an Arab family comprising 4.8 persons, as compared to 3.4 persons in Jewish families (ICBS, 2010). Most Arab citizens reside in Arab communities in the northern or southern peripheries of the country. Policies towards this sector often appear to be influenced by the conflicting imperatives of a democratic society with a universalistic welfare state and the ever-present ethnic tensions between a dominant Jewish majority and an Arab minority that lacks representation in governing coalitions. These tensions are particularly acute during periods of conflict between Israel and the Palestinians. Existing discrimination of Arabs within the labour market, unequal distribution of state resources primarily with regard to local services and education, and a chronic lack of physical and employment infrastructures in Arab towns and villages and in their vicinity have exacerbated this social problem (Abu-Bakr, 2002; Lewin and Stier, 2002; Haidar, 2010). The labour market participation of Arab women in Israel remains very low. Although this has increased significantly from a low of 5 percent of working age women in 1979, it was still only 34 percent in 2010. Participation levels are highest among non-married and highly educated women. Among Arab men, the participation level is similar to that of non-Orthodox Jewish men, and is nearly 80 percent of the working age population (Kimhi, 2012). However, lower education levels (which are especially evident among Arab women) and limited opportunities in the labour market have implications for income levels among Arabs. As a result, Arab men and women tend to be employed predominantly in low-income sectors of the economy, and the average wage income of Arabs in the labour market in 2008 was only 61 percent of that earned by Jews (ICBS, 2010). Efforts to increase social inclusion of the Arab population in Israel have typically included government commitments to increase funding for education and social welfare in the Arab sector and to devote additional resources to local infrastructures. However, due to a lack of Arab political influence in the policy making process, these commitments often remain only partially fulfilled. Labour market policies have been a major focus of state efforts to address income levels in the Arab sector in Israel. Arabs were a specific focus of the mandatory state welfare-to-work program in the mid-2000s (Maron, 2014) and, due to their low incomes and large family sizes, were significantly impacted by cuts in child benefits. In the years since the dismantling of the welfare-to-work program, non-profits have operated some labour market training programs in this sector, sometimes with government funding. In addition, non-profits have also sought to spearhead economic initiatives aimed at furthering Arab integration into the high-tech sector. While there is evidence of significant growth in labour market participation rates of Arab women and an increase in education levels, the still comparatively low wage income levels of this population and the dramatic cuts in transfer payment levels have led to increased poverty levels among Israeli Arabs and an overall failure to enhance social integration. 341

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While comprising only a tenth of Israel’s population, the ultra-orthodox Jewish community is the fastest growing social group in the country. Current estimates indicate that this community is predicted to constitute 14.6 percent of Israel’s population in 2030 (NII, 2014). This growth in size reflects the extraordinary fertility levels among this population (6.3 as compared to 2.5 for the non-orthodox Jewish population and 3.3 for the Arab population), which have increased in recent decades. These have been linked to diverse factors, among them the social and religious values of their community, which encourages high fertility and discourages the use of contraceptives, the effectiveness of mutual support networks and the impact of welfare state support for families (Berman, 2000; Manski and Meyshar, 2003). The labour market participation rate remains low for ultra-orthodox men, and it is currently 45 percent of the working age male population. By contrast, the participation rate for women in this community is high and has risen over a 20-year period from 50 to 80 percent (Kimhi, 2012). Notably, however employment of ultra-orthodox women is typically in low-wage service jobs within their own community. The low labour market participation rates among ultra-orthodox men in Israel is a consequence of a gradual adoption, over the last few decades, of a way of life that places greater emphasis on religious studies rather than either formal education and academic studies or labour market participation (Regev, 2013). The separate education system for this community emphasizes religious content and tends to minimize or ignore subjects of study with relevance to the labour market (such as English, mathematics and sciences). This is particularly the case for men. Studying in a yeshiva, a religious institution for advanced Torah studies, is perceived as the preferable option for men in this community. Subsidies from the state and philanthropic contributions from abroad provide stipends for the students in these institutions. It is estimated that 77 percent of ultra-orthodox men between the ages of 25 and 29 study full-time in yeshivas, and nearly a half are still doing so when they are in their early 40s. Young ultra-orthodox men are exempt from compulsory military service if they are full-time yeshiva students, a factor which has been perceived as further entrenching preferences for this way of life (Bick, 2006). Apart from cuts in transfer payments that were perceived as encouraging low labour market participation among the ultra-orthodox, the Israeli welfare state has sought to increase labour market participation by offering ultra-orthodox men and women vocational training opportunities, by facilitating their movement into the labour market, and by seeking to increase levels of higher education among them. The emphasis in these programs has been upon catering to the cultural and religious sensitivities of the ultra-orthodox community and focusing upon employment options relevant to members of the community (Cave and Aboody, 2011).

Conclusions Seen as a whole, the Israeli welfare state is a relatively comprehensive Mediterranean welfare state that offers benefits and services which provide support and resources to deal with a wide range of needs and contingencies. However, social protection funding is low, the generosity of the benefits and the services is limited and the quality of the services, and access to them is often inadequate. Moreover, more generous benefits are often skewered towards beneficiaries identified with the state values or goals. As such, and despite its comprehensiveness, the Israeli welfare state has been relatively unsuccessful in overcoming income inequalities created within an ever more polarized labour market and in reducing differential access to social services which have undergone a rapid process of privatization and commercialization. These are exacerbated by the relatively low levels of social protection and the specific demographic and ethnic characteristics of Israeli society. 342

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As in other Mediterranean welfare states, inherent limitations of state interventions into the labour market in Israel and the predominant role of religion and the family have limited the Israeli welfare state’s ability to address successfully social problems and, in particular, poverty and inequality. This is especially true of two social groups – Arabs and ultra-orthodox Jews. Moreover the ongoing conflict with Israel’s neighbors and the dominance of neoliberal policies for much of the last two decades have led to an unwillingness to devote sufficient resources to social protection. In reaction to these trends, pressure to increase social spending and to strengthen various aspects of the welfare state in Israel has been growing in recent years. A wave of mass protest activity during the summer of 2011 placed social protection high on the public agenda and led to some policy change, primarily in the form of extending state subsidized childcare (Rosenhek and Shalev, 2014). The establishment of the National Committee to Combat Poverty in 2013 was another result of this public sentiment, and it presented policy makers with an ambitious blueprint for reducing poverty in the country. External pressure for welfare state expansion has also been forthcoming following Israel’s joining the OECD in 2010 and the publication of reports on the high level of poverty and inequality in Israel. Nevertheless it is doubtful whether significant expansion and restructuring of the Israeli welfare state is likely to occur in the foreseeable future.The contours of the welfare state are strongly embedded, as are the social, ethnic and religious divides. A neoliberal approach to economic and social policy still dominates much of the policy discourse while security issues continue to occupy much of the policy agenda. Overcoming these obstacles to welfare state reform and to expansion will be a formidable task.

Note 1 The education system is usually not included in discussions of social welfare for diverse reasons; for an overview of the educational system in Israel, see Yogev (2001).

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Loewenstein, A. and Daatland, S. O. (2006), Filial Norms and Family Support in a Comparative Crossnational Context: Evidence from the OASIS Study, Ageing and Society,Vol. 26, No. 2, pp. 203–223. Manski, C. F. and Meyshar, J. (2003), Private Incentives and Social Interactions: Fertility Puzzles in Israel, Journal of the European Economic Association,Vol. 1, No. 1, pp. 181–211. Maron, A. (2014), Activation via Intensive Intimacies in the Israeli Welfare-to-Work Program: Applying a Constructivist Approach to the Governance of Institutions and Individuals, Administration and Society, Vol. 46, No. 1, pp. 87–111. Metzer, J. (2014), Some Perspectives on the Israeli Economy: Stocktaking and Looking Ahead, Israel Studies, Vol. 19, No. 2, pp. 135–161. MWSS, Ministry of Welfare and Social Services (2014), Review of Social Services, 2013, Ministry of Welfare and Social Services, Jerusalem, http://www.molsa.gov.il (in Hebrew). Mizrahi, S. and Cohen, N. (2012), Privatization Through Centralization in the Israeli Health Care System: The Case of the National Health Insurance Law and Its Amendments, Administration and Society,Vol.  44, No. 4, pp. 412–437. Monnickendam, M. (2011), Minimum Income Standards in Israel: A Recent History in Economic and Humanistic Discourses, Social Policy and Administration,Vol. 45, No. 5, pp. 525–538. Mor, S. (2006), Between charity, welfare, and warfare: A Disability Legal Studies analysis of privilege and neglect, Yale Journal of Law and the Humanities,Vol. 18, No. 1, pp. 63–136. Mundlak, G. (2007), Fading Corporatism, Cornell University Press: Ithaca, NY. Nachmias, D. and Arbel-Ganz, O. (2005), The Crisis of Governance: Government Instability and the Civil Service, Israel Affairs,Vol. 11, No. 2, pp. 281–302. Natan, G. (2011), Care for People Who Need Daily Living Assistance (Manpower Needs and Labor Policy in the Care Sector), Knesset Research and Information Centre: Jerusalem (in Hebrew). Navon, G. and Chernichovsky, D. (2012), Private Expenditure on Health Care, Income Distribution, and Poverty in Israel, Bank of Israel: Jerusalem. NII, National Insurance Institute (2014), Annual Survey 2013, National Insurance Institute: Jerusalem. OECD (2013), Review of Recent Development and Progress in Labour Market and Social Policy in Israel: Slow Progress Towards a More Inclusive Society, OECD: Paris. PCBS, Palestinian Central Bureau of Statistics (2014), Population, http://www.pcbs.gov.ps. Pinto, O. (2014), Recipients of General Disability Pension, 2013, National Insurance Institute: Jerusalem. Preminger, J. (2013), Activists Versus Bureaucrats:The Failure of the Israeli Social Workers’ Campaign, Industrial Relations Journal,Vol. 44, No. 5–6, pp. 462–478. Regev, E. (2013), Education and Employment in the Haredi Sector,The Taub Center for Social Policy Research: Jerusalem. Rimmerman, A. and Herr, S. S. (2004), The Power of the Powerless: A Study on the Israeli Disability Strike of 1999, Journal of Disability Policy Studies,Vol. 15, No. 1, pp. 12–18. Rosenhek, Z. and Shalev, M. (2014), The Political Economy of Israel’s “Social Justice” Protests, Contemporary Social Science,Vol. 9, No. 1, pp. 31–48. Safadi, N. S. and Easton, S. D. (2014),The Evolution of the Social Welfare System in Palestine: Perspectives of Policymakers in the West Bank, International Journal of Social Welfare,Vol. 23, No. 1, pp. 52–60. Schellekens, J. (2009), Family Allowances and Fertility: Socioeconomic Differences, Demography, Vol.  46, No. 3, pp. 451–468. Shalev, M. (1992), Labour and the Political Economy in Israel, Oxford University Press: Oxford. ——— (2010), “Loyalty Benefits” and the Welfare State, http://www.fljs.org. Shalev, M.; Gal, J., and Azary-Viesel, S. (2013), The Cost of Social Services, in D. Ben-David (ed.), The State of the Nation Report: Society, Economics and Policy 2011–2012, The Taub Center for Social Policy Research: Jerusalem. Shamir, H. and Mundlak, G. (2013), Spheres of Migration: Political, Economic and Universal Imperatives in Israel’s Migration Regime, Middle East Law and Governance,Vol. 5, pp. 112–172. Toledano, E.; Frisch, R.; Zussman, N., and Gottlieb, D. (2009), The Effect of Child Allowances on Fertility, National Insurance Institute: Jerusalem.

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Weiss, I.; Spiro, S. E.; Sherer, M., and Korin-Langer, N. (2004), Social Work in Israel: Professional Characteristics in an International Comparative Perspective, International Journal of Social Welfare, Vol.  13, pp. 287–296. Weiss-Gal, I. (2013), Social Workers Affecting Social Policy in Israel, in J. Gal and I. Weiss-Gal (eds.), Social Workers Affecting Social Policy, Policy: Bristol. Yogev, A. (2001), Bringing Order to Chaos? Educational Policy in Israel in the Postmodern Era, Israel Affairs, Vol. 7, No. 4, pp. 209–234. Zehavi, A. (2012), Moving in Opposite Directions? Religious Involvement in Welfare Provision in Israel and the Low Countries, Social Service Review,Vol. 86, No. 3, pp. 429–453. ——— (2013), Religious Supply, Welfare State Restructuring and Faith-Based Social Activities, Political Studies,Vol. 61 pp. 561–574.

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21 The Indian welfare state system With special reference to social policy and the burden of disease Christian Aspalter

Yes, that’s right, India has a welfare state system, but India does not have a welfare state in the European sense (Vivekanandan, 2001).The Indian welfare state system is small and caters mainly to a small segment of society, but it is still relatively huge in absolute terms. When I visited Professor B. Vivekanandan at Jawaharlal Nehru University in New Delhi in the summer of 2001, he, being an expert on European social democracy and European welfare states himself, told me this. It was an eye-opening conversation, which led me to change my forthcoming publications from then on, by many times using the term “welfare state systems,” not “welfare states.” Besides when looking at welfare state systems, we can without a doubt also look at lesser developed, and even barely developed, welfare state systems, without having to ask the question: “when is a welfare state a welfare state?” That is, how much social spending or how many social security columns there need to be to qualify for “a welfare state” (in the European sense). On top, I figured that using the term “welfare state systems” has many advantages, as the reader instantly (I hope) gets the idea that there are (or ought to be) different kinds (types) of welfare state systems. Also, the word “systems” draws particular attention of the reader to the point that there are system structures, system designs and so forth that need to be investigated – and not just the overall size of the welfare state (especially e.g. monetary inputs, see EspingAndersen, 1990). The title of this volume, hence, is also a result of the very important conversation I had with Professor Vivekanandan. Why cover India in a book looking at welfare state systems around the world? India will soon house more people than China. India has one of the largest disease burdens and diswelfare burdens in the world.Whatever happens in India affects the lives of tens and hundreds of millions of people. Because it is the prime target of social policy to save lives, from unnecessary premature death, from disease and accidents, from poverty and any kind of misery (Aspalter, 2017), we need to pay a great deal more attention to India. In preparing this volume, I have found (yet again) that there are far fewer experts on India than one would imagine, given the size of the population of, and geopolitical overall importance of, India (and its being a former British colony) – with now more than 2.26 billion people and soon the most populous country in the world. This chapter is an essential follow-up study to my previous works on India that were based on my research trip to New Delhi in 2001. And, luckily, this time, I found that India is on the 347

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move. The Indian welfare state systems after decades of neoliberalism in Indian social policy (see e.g. Ghosh, 2005), finally, has kicked off a series of (hopefully) game-changing events, for example by stipulating universal access to free medicines for all in 2012. Careful considerations are to be applied, because any premature euphoria, given the past record of Indian social policy and the complex social policy-obstructing institutional set-up of the Indian federal government system (  Jagannadham, 1974, 1967; Chowdhry, 1985; Goel and Jain, 1988; Aspalter, 2001, 2003a, 2003b), should be avoided, and special attention given to the empirical facts and the social policy context and history of this welfare state system on the (very special) Indian subcontinent. To analyze the state of social welfare in India further, a special section of this chapter looks into the burden of disease of Indian society, from a comparative point of view – as one only truly knows how good or bad something is when being able to compare it internationally (or inter-regionally), or to compare it over time.

The Indian welfare state system The welfare state system in India today can be aptly described as being based on (and prone to) (1) commercialization of welfare services, (2) decentralization and (3) fragmentation of social policy and its programs (see Z. Singh, 2013).When looking at a scale or degree of institutionalization of a welfare state system (Gough, 2004, 2007; Gough et al., 2004; Abu Sharkh and Gough, 2010) or any tripartite classification that is based thereon (e.g. proto-welfare states, informal security regimes, and insecurity regimes), one cannot understand and decipher the essence of the Indian welfare state system. There is strong degree of central planning in social policy and a very long list of social policy laws (Table 21.1), which arguably show a strong degree of institutionalization in social welfare Table 21.1 History of important social policy legislation and regulation in India Legislation or Regulation

Year

Indian Slavery Act Caste Disabilities Removal Act Fatal Accidents Act Hindu Widow Remarriage Act Female Infanticide Prevention Act Brahmo Marriage Act Factories Act Workmen’s Compensation Act Provident Fund Act Trade Unions Act Hindu Heritance (Removal of Disabilities) Act Trade Disputes Act Child Marriage Restraint Act Hindu Women’s Right to Property Act Public Distribution System (PDS) Mines Maternity Benefit Act Coal Mines Labor Welfare Fund Dock Workers (Regulation of Employment) Act Employees’ State Insurance Act (on Social Security and Maternity Protection) Plantations Labor Act Employee State Provident Fund Ordinance

1843 1850 1853 1856 1870 1872 1881 1923 1925 1926 1928 1929 1929 1937 1939 1941 1944 1948 1948 1951 1951

348

The Indian welfare state system

Legislation or Regulation

Year

Employees’ Provident Funds & Miscellaneous Provisions Act School Meals Program in Tamil Nadu Rural Manpower Program Maternity Benefit Act Employees’ Family Pension Scheme Payment of Gratuity Act Integrated Child Development Scheme (ICDS) Employees’ Deposit-Linked Insurance Scheme Mental Health Act Revamped Public Distribution System (RPDS) Employees’ Pension Scheme National Social Assistance Program National Program for Nutritional Support to Primary Education Targeted Public Distribution System (TPDS) Financial Assistance to Widows Scheme Sampoorna Grameen Rozgar Yojana (SGRY) Program National Food for Work Program (NFFWP) National Rural Employment Guarantee Act Indira Gandhi National Widow Pension Scheme Unorganized Workers’ Social Security Act Universal Access to Free Medicines Mental Health Care Bill National Food Security Act (Right to Food Act)

1952 1956 1960 1961 1971 1972 1975 1976 1987 1992 1995 1995 1995 1997 1997 2001 2004 2005 2009 2008 2012 2013 2013

Note: This is a demonstrative, not exhaustive list. Sources: MSJE (2015), MRD (2015), MWCD (2015), UNFPA (2015), Balani (2013), Z. Singh (2013), Rajya Sabha (2013), Palriwala and Neetha (2009), Aspalter (2003a, 2003b), Kurz (2001), Barura (1995), Goel and Jain (1988), Rath (1978), Punekar and George (1974), Madan (1973), and Sastri (1960).

policy. On the other hand, the institutions needed to implement social policies and programs in the field, on the state and local government levels, are wanting a great deal, and this has to do more with the institutional set-up of India itself than (but sometimes in addition to) the unwillingness of politicians and administrators to implement national policies or programs, as well as the lack of local- or state-level social policy institutions or the lack of their administrative capacity and/or efficiency (Aspalter, 2003a, 2003b; Collier, 2007). There was a wave of social and labor legislation in the 1920s (Table 21.1). As a result, under the Workmen’s Compensation Act of 1923, today employers are mandated to pay 50 percent of the monthly wage multiplied by a factor related to age, or an amount of INR 80,000, whichever is more in case of death of a worker or 60 percent of the monthly wage multiplied with the age factor or INR 90,000, whichever is more (DSA, 2013). One of the most significant pieces of social welfare legislation in the early period of welfare state system construction in India, the 1948 Employees’ State Insurance (ESI) Act, was enacted in 1948 at the dawn of the New Indian Republic (1951). It provides medical care to workers in the extremely small formal sector (which today covers about 7 percent of the workforce), covering the risks of sickness, maternity, temporary and permanent disability, and employment injury resulting in loss of wages, earning capacity or death. The coverage of the Employees’ State Insurance Act is limited in the sense that it caters only to companies with 10 or more employees. Employers pay 4.75 percent and employees 1.75 percent of payroll. State governments pay 12.5 percent of medical costs for persons covered 349

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by insurance, and 100 percent for persons under social assistance coverage. In case of sick leave, employers need to pay half of the salary for their employees. Sickness benefits are paid, after a 2-day waiting period, at 70 percent of the wage, for up to 91 days in any two consecutive designated 6-month periods. Until today, this social security system has not been implemented in four Indian states: Arunachal Pradesh, Manipur, Mizoram and Sikkim (Mehrotra, 2008; DSA, 2013; ISSA, 2015a, 2015g). The Indian pension system caters to 35 million out of 400 million workers, 26 million of whom are covered by the Employees’ Provident Fund Organization, which caters only to employees earning up to INR 6,500 per month (thereafter membership is voluntary) in companies with 20 employees or more. Firms stay covered by the scheme if the number of employees falls below 20. The Employees’ Provident Fund Organization spans three existing schemes: the Employees’ Provident Funds Scheme (1952), the Employees’ Deposit Linked Insurance Scheme (1976) and the Employees’ Pension Scheme (1995) (DSA, 2013; ISSA, 2015g). The contribution rates for these schemes vary. The employers contribute 1.67–3.67 percent and the employees 10–12 percent in the case of the Employees’ Provident Funds Scheme. For the Employees’ Deposit Linked Insurance Scheme, only the employers contribute 0.5 percent of the payroll. The Employees’ Pension Scheme is financed by the government (1.16%) and the employers only (8.33%). There are additional pension funds for civil servants, seaman, and for example workers employed in coal mines and tea plantations in the state of Assam (DSA, 2013). All in all, there are civil service pensions, a statutory pension scheme and a provident fund scheme for the organized sector; a superannuation scheme for government employees; small saving schemes (that offer higher interest rates), pension schemes and welfare funds for senior citizens and the destitute; and micro-pension schemes for informal sector women workers (  Jha and Bhattacharyya, 2010). Civil servants enjoy the benefits of the superannuation pension and retiring pension under different regulations of civil servant pension schemes. New civil servants, after January 2004, join the New Pension System (NPS) on a mandatory basis; this is a defined-contribution (DC) pension scheme in which contributions and investment returns are tax-exempt but withdrawals are taxable. Since May 2009, membership was extended to all private-sector workers on a voluntary basis (ISSA, 2015f). Under the Employees’ Provident Funds & Miscellaneous Provisions Act of 1952, both DC and DB (defined-benefit) systems are provided. The Employees’ State Insurance scheme (1948) also comprises DC schemes for organized sector workers, plus workers employed in restaurants, multiplexes and so forth (  Jha and Bhattacharyya, 2010). In a nutshell, the Indian type of old-age pension system is a highly rudimentary version of a Bismarckian social security system that is highly fragmented and that renders special privileges to civil servants and special occupational groups (in this case the formal labor sector), with different contribution and benefit levels. Due to the Maternity Benefit Act (first enacted in 1961), today employers have to provide 12 weeks of paid wages (of the average wages of the last 3 months for maternity leave), that is 6 weeks before and after the day of delivery. The Payment of Gratuity Act (1972) stipulated that any employee that has been working for 5 years or more with the same employer will get 15 days of additional wages (DSA, 2013). In 1975, the federal government started the Integrated Child Development Scheme (ICDS) on an incremental basis, with 33 blocks covered at the beginning. However, by the end of 1991, about 13 million children below 6 years of age and 2.7 million pregnant and nursing mothers were covered by the very same scheme, receiving supplementary nutritional aid. The federal 350

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government saw the positive effects of the scheme on children’s health outcomes and educational performance and universalized the scheme over the years. ICDS had positively impacted the health of preschool children in terms of infant mortality rate (IMR), immunization coverage and nutritional status, and their continuation into primary school with as many as 89 percent of children with preschool experience continuing in school as compared to 52 to 60 percent without preschool experience. (Palriwala and Neetha, 2009: 30) In 2001, the Supreme Court of India directed the Government to install one Anganwadi Center that provides ICDS services for each 1,000 persons in rural and urban areas and for each 700 persons in tribal areas. Over the subsequent 5 years, the financial input for ICDS doubled, and the number of Anganwadi Centers increased by a further 37 percent. The services included under ICDS now include supplementary nutritional aid; immunization for children, pregnant and nursing mothers; referral services following health check-ups; non-formal preschool education; and nutritional and health education about children below years, as well as pregnant and nursing mothers. It has hence become the largest child nutrition and early child development program in the world (Palriwala and Neetha, 2009). It took the Indians many governments to learn lessons from problems related to the Public Distribution System (PDS) first set up in 1939 in Mumbai (FAO, 2015). In 1992, the Revamped Public Distribution System (RPDS) started to geographically target food distribution to the remotest areas of India, which also had the largest poor and disadvantaged population. Problems due to corruption among private middlemen and vendors were mounting. Other problems were that middlemen and vendors frequently changed high-quality grains or products with inferior goods, causing public uproar. Chhattisgarh, as a consequence, made major reforms, abandoning the use of private middlemen, and thus has succeeded in solving a great deal of the previous problems. The government of Chhattisgarh increased coverage to 80 percent of the rural population, turning public distribution system in Chhattisgarh into a quasi-universal model and a model for the rest of India (Balani, 2013; TTI, 2014). As improvements have been made relatively slowly over time, seen from historical perspective, the 1990s have changed this governmental distribution system of food and other basic need items at discount prices significantly. The second major step was the transformation of the Revamped Public Distribution System into the Targeted Public Distribution System (TPDS), which from then on distinguished between deserving poor below the poverty line, who still received discount prices, and the general public, who had to pay a normal price. The TPDS worked best in left-controlled states like West-Bengal, Kerala and Tripura, and in Tamil Nadu, where the poor and the working classes also have a great deal of political clout, as in both cases poor people have come to understand and insist upon their right to food. However, in total, the amount of food available per person was on the decline in the 1990s (Ghosh, 2005: 297; Palriwala and Neetha, 2009: 14). After the very positive and long-term experience of the southern state of Tamil Nadu that implemented its first school meals program with public funding in 1956, that is, four decades later, the federal government set up its first national school meal program in 1995, the National Program for Nutritional Support for Primary Education. This program distributed either 3 kg of grain per month or a cooked meal of 100 grams of grain per day for 200 days a year to all children enrolled in primary schools. The positive experience of Tamil Nadu – when it had switched from giving out grains to providing warm meals – has shown in the past, for example, that warm cooked meals are much more preferable than simply handing out grains in improving 351

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school attendance. As a result, the Supreme Court of India ordered all state and union territory governments to provide a meal to every child in every government and government-aided primary school for at least 200 days a year, also specifying the nutritional content of those meals (Palriwala and Neetha, 2009). The Mahatma Gandhi National Rural Employment Guarantee Scheme was set up in 2006, 1 year after the stipulation of the National Rural Employment Guarantee Act in 2005. It is “the largest social protection programme in the world” (McCord and Meth, 2013: 173), as it employs 55 million workers each year. It guarantees 100 days of wage employment per year to every rural household whose adult member(s) volunteer to do casual manual work. The minimum daily wages are the ones that are to be paid in the agricultural sector in the respective states and union territories, but not less than INR 60/day. The beneficiaries of this employment program will work in rural infrastructural projects and projects focusing on increasing agricultural productivity. In case such an employment is not available for those beneficiaries, they will get unemployment benefits instead.The National Rural Employment Guarantee Scheme signaled a radical departure from previous employment programs (work for food programs, drought relief programs, etc.). Jobs from then on were guaranteed within a 5 km radius on a casual basis each year for each rural household that enrolled, and the rural employment crisis was accepted as being a constant social problem rather than a problem caused by natural disasters (ISSA, 2015h; Palriwala and Neetha, 2009). In the past decades, the government of India has supported, especially since the early 1990s, the growth of private industries in health care and social security provision, leaving most of the workforce out of any social security systems; only about 6 percent from the 93 percent of the Indian workforce that are in the informal sector are benefiting from government programs in social security – mostly due to the enactment of the 2007 social security scheme for unorganized workers (Pedicini, 2011). In the year 2007, the government established the Rashtriya Swasthya Bima Yojna (RSBY) program, which provides insurance from major health shocks that require hospitalization to poor families (under the poverty line) that rely on informal sector employment. The federal government pays 75 percent of the costs, and the state and union territory government the remaining 25 percent. For a nominal fee of INR 30, families covered under this program are entitled to free coverage to 700 different inpatient medical procedures, up to an annual limit of INR 30,000 (ISSA, 2015b). In the same year (2007), the government of  India announced that it would set a health insurance program for destitute people, based on an asset- and means-test, where the insured would contribute 5 percent of the costs, the states and union territories 20 percent, and the non-governmental organization (NGO) that is running the scheme 75 percent (Mehrotra, 2008). But, this scheme has hardly materialized across the country. In 2010, a new game-changing series of social welfare programs was set in motion by the federal government, generating newfangled hope for a pro-welfare-oriented course for the development of the Indian welfare state system (see e.g. Balani, 2013; Z. Singh, 2013). In October 2010, federal government approved the Indira Gandhi Matritva Sahyog Yojana Program for pregnant and lactating women (ISSA, 2015b), echoing the generally positive experience in improving the health of mothers and children in a large number of developing countries around the world, with Brazil having led this new movement across the developing world (see Rawlings and Rubio, 2003; Rawlings, 2004; Lindert et al., 2007; Fiszbein and Schady, 2009; Ferreira and Robalino, 2010; Lavigne and Vargas, 2013; Aspalter, 2016). The Indira Gandhi Matritva Sahyog Yojana Program is a conditional cash transfer program that encourages women to pursue early and exclusive breastfeeding for the first 6 months and 352

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provides cash transfers based on individual behavior that support maternal and child health (ISSA, 2015b). Also, in 2010, the federal government extended the coverage of the Rashtriya Swasthya Bima Yojna (RSBY) Program to now also include a vast number of street vendors, and the Employee’s State Insurance (ESI) Act has been amended to provide for more and better coverage of benefits, and the eligibility was also extended to workers earning from at least INR 100/day up to INR 15,000/month (up from INR 10,000) in factories and companies covered by the ESI (ISSA, 2015a, 2015b, 2015c). In the next year (2011), the Indian government added another effort to smoothen the nationwide problem of dire poverty during old age, as it extended coverage of the Indira Gandhi National Old-Age Pension Scheme (IGNOAPS), by lowering the eligibility age from 65 to 60, covering then 7.2 million additional pensioners. In addition, the benefits for those aged 80 and above have been increased from INR 200 to INR 500 (as inflation has deflated its value dramatically over time) (ISSA, 2015d). In 2012, the federal government announced a new universal plan that provides free essential medicines to all citizens. Three-quarters of the cost are carried by the federal government, and the rest by the state and union territory governments. The state and union territory governments have been requested to make their own list of approved drugs, for this the federal government circulated the 2011 National List of Essential Medicines, which contained 348 drugs, including for example anti-AIDS drugs, analgesics, anti-ulcer drugs, anti-psychotic drugs, sedatives, anesthetic agents, lipid lowering agents, steroids and anti-platelet drugs (ISSA, 2015e). In order to secure large cost savings, the federal government also approved the establishment of a Central Procurement Agency for bulk procurement of drugs, to be purchased directly from the manufacturers or importers through an open tender, and to be stored in district-level warehouses, before being sent off to 160,000 subcenters, 23,000 primary health centers, 5,000 community health centers, and 640 district hospitals across the country (ISSA, 2015e). This is the most ambitious social security project of the Indian welfare state system yet, and gives great hope for a more positive future of its development. In 2013, the Parliament passed the National Food Security Act, which aims to guarantee food entitlements up to 75 percent of the rural population, and up to 50 percent of the urban population, in all of the country (Balani, 2012, 2013; MRD, 2015)

Calling for social policy action: India’s burden of disease Apart from India, I have chosen 14 other large or larger developing or not yet developed countries to make comparisons regarding India’s burden of disease – mostly from within South Asia and neighboring Southeast Asia, but also Brazil and three large countries from Africa (Mozambique, the Democratic Republic of Congo, and Nigeria), to strengthen the comparative context. As we will see (in Tables 21.2–21.5 and Figures 21.1–21.2), for the most part India’s burden of disease is among the lowest from the group of South Asian and Southeast Asian countries plus Brazil – apart from the three African countries, which have a much greater burden of disease than India. When it comes to child nutrition, India even negatively outperforms these three African countries. Life expectancy at birth is generally a very good social development indicator, but it encompasses a series of social problems – and burdens of disease in particular, which are to be investigated further. Over the last two decades, India has only managed to increase its life expectancy at birth to 66 years of total population, that is 4 years lower than the respective number for very poor 353

Christian Aspalter Table 21.2 Comparison of life expectancy (LE) at birth in developing and not yet developing countries over time

Vietnam China Sri Lanka Thailand Brazil Indonesia Bangladesh Philippines Nepal India Myanmar Pakistan Nigeria Mozambique DR Congo

LE 1990

LE 2012

Diff.

Male LE 1990

Male LE 2012

Diff.

Female LE 1990

Female LE 2012

Diff.

70 69 69 69 66 62 60 66 54 58 59 60 46 43 49

76 75 75 75 74 71 70 69 68 66 66 65 54 53 52

6 6 6 6 8 9 10 3 14 8 7 5 8 10 3

66 67 65 66 63 60 60 63 54 57 57 59 45 41 48

71 74 71 71 70 69 69 65 67 64 64 64 53 52 50

5 7 6 5 7 9 9 2 13 7 7 5 8 11 2

75 71 75 72 70 64 59 70 55 58 61 61 47 45 51

80 77 78 79 77 73 71 72 69 68 68 66 55 54 53

5 6 3 7 7 9 12 2 14 10 7 5 8 9 2

Note: LE (average life expectancy in years). Source: WHO (2014).

Table 21.3 Comparison of maternal, infant and under-5 mortality rates in developing and not yet developing countries over time

Sri Lanka Thailand China Brazil Vietnam Philippines Indonesia Bangladesh Nepal India Myanmar Pakistan Mozambique Nigeria DR Congo

MMR 1990

MMR 2013

RK

Diff.

IMR 1990

IMR 2012

RK

Diff.

U5MR 1990

U5MR 2012

RK

Diff.

Total RK

49 42 97 120 140 110 430 550 790 560 580 400 1,300 1,200 1,000

29 26 32 69 49 120 190 170 190 190 200 170 480 560 730

2 1 3 5 4 6 9 7 9 9 12 7 13 14 15

20 16 65 51 91 –10 240 380 600 370 380 230 820 640 270

18 31 41 52 36 41 62 100 99 88 76 106 155 126 112

8 11 12 13 18 24 26 33 34 44 41 69 63 78 100

1 2 3 4 5 6 7 8 9 11 10 13 12 14 15

10 20 29 39 18 17 36 67 65 44 35 37 92 48 12

21 38 54 62 51 59 84 144 142 126 106 138 233 213 171

10 13 14 14 23 30 31 41 42 56 52 86 90 124 146

1 2 3 3 5 6 7 8 9 11 10 12 13 14 15

11 25 40 48 28 29 53 103 100 70 54 52 143 89 25

1 2 3 4 5 6 7 7 9 10 11 11 13 14 15

Note: MMR = maternal mortality rate (per 100,000 live births); IMR = infant mortality rate below year 1 (per 1,000 live births); U5MR = under 5 mortality rate (per 1,000 live births); Diff. = difference; RK = respective ranking. Source: WHO (2014).

Bangladesh, which is plagued by frequent massive national disasters and special massive problems, like the risk of arsenic poisoning of the drinking water for about 70 million people (see e.g. Sarker, 2008a, 2008b). In our country comparison, apart from the three African countries, only 354

Table 21.4 Comparison of some major causes for the burden of disease (lack of improved drinking water/sanitation and use of solid fuels) in developing and not-yet-developing countries over time, part 1

Brazil Thailand Vietnam Sri Lanka China Philippines Indonesia Pakistan India Myanmar Nepal Bangladesh Nigeria DR Congo Mozambique

Impr. Drink. Water Sources 1990

Impr. Drink. RK Diff. Pop. Using Water Impr. Sources Sanitation 2012 1990

Pop. Using RK Diff. Pop. Using RK Total RK Impr. Solid Fuels Sanitation 2012 2012

88 86 61 68 67 84 70 85 70 56 66 68 46 43 34

98 96 95 94 92 92 85 91 93 86 88 85 64 46 49

81 93 75 92 65 74 59 48 36 77 37 57 28 31 21

1 2 3 4 6 6 11 8 5 10 9 11 13 15 14

10 10 34 26 25 8 15 6 23 30 22 17 18 3 15

67 82 37 68 24 57 35 27 18 61 6 33 37 17 8

3 1 5 2 7 6 8 10 12 4 11 9 14 13 15

14 11 38 24 41 17 24 21 18 16 31 24 -9 14 13

6 24 51 74 45 49 47 62 63 93 80 89 75 93 95

1 2 6 9 3 5 4 7 8 13 11 12 10 13 15

1 1 3 4 5 6 7 8 8 10 11 12 13 14 15

Note: For lack of data, in the case of Myanmar the value for the year 2000 is used instead of 1990 as a proxy; Diff. = difference; RK = respective ranking. Source: WHO (2014).

Table 21.5 Comparison of some major causes for the burden of disease (underweight children aged ≤5; alcohol consumption and prevalence of smoking among adults aged ≥15) in developing and not-yet-developing countries over time, part 2

Brazil China Vietnam Mozambique Thailand Indonesia Philippines Sri Lanka Myanmar DR Congo Nigeria Nepal Pakistan Bangladesh India

Underweight Children U5 1990–95

Underweight Children U5 2006–12

Diff.

Diff. (%)

Alcohol Consumption (liters of pure alcohol/year)

Smoking Prev. (%), Male

Smoking Prev. (%), Female

n.a. 12.6 36.9 23.9 16.3 29.8 29.9 33.8 28.8 30.7 35.1 44.1 39.0 61.5 56.6

2.2 3.4 12.0 15.6 17.0 18.6 20.2 21.6 22.6 24.2 24.4 29.1 30.9 36.8 43.5

n.a. 9.2 24.9 8.3 –0.7 11.2 9.7 12.2 6.2 6.5 10.7 15 8.1 24.7 13.1

n.a. 73.0 67.5 34.7 –4.3 37.6 32.4 36.1 21.5 21.2 30.5 34.0 20.8 40.2 23.1

8.7 6.7 6.6 2.3 7.1 0.6 5.4 3.7 0.7 3.6 10.1 2.2 0.1 0.2 4.3

22 47 46 n.a. 46 67 44 31 38 16 10 37 38 48 25

13 2 2 n.a. 3 3 10 1 7 5 2 25 7 2 4

Note: Ranked according to underweight children under 5 years of age (2006–2012). Source: WHO (2014).

Christian Aspalter

25 20 15 10

HIV/AIDS 2000 Diarrhea 2000 Measles 2000 Malaria 2000

5

Sr i

La

nk a Br az C il Th hin a a Ph ila il nd Ba ipp ng ine la s d Pa esh ki M sta ya n nm a In r di Vi a e In tna do m ne si a D Nep R M C al oz on am go bi qu N e ig er ia

0

Figure 21.1 Distribution of causes of death among children below 5 years of age (% of total causes of death), in 2000 Note: Ordered from best (left) to worst (right). Source: WHO (2014).

25 20 15 10

HIV/AIDS 2012 Diarrhea 2012 Measles 2012 Malaria 2012

5

Sr

iL

an

ka Br az C il h Th in a a Ph ila ilip nd Ba p ng ine la s d Pa esh ki M sta ya n nm a In r di Vi a e In tna do m ne si a D Nep R M C al oz on am go bi qu N e ig er ia

0

Figure 21.2 Distribution of causes of death among children below 5 years of age (% of total causes of death), in 2012 Note: Ordered from best (left) to worst (right). Source: WHO (2014).

Pakistan has achieved a lower life expectancy level, standing at 65 years in the year 2012. The largest improvement made was by one of the poorest countries in Asia, much poorer than India. Over 22 years (1990–2012), Nepal managed to increase its life expectancy by 14 years, which is a remarkable achievement indeed. When looking at the numbers for male and female life expectancy we see that six countries, from our group of countries covered in this comparison, 356

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have managed to greatly improve female life expectancy between 1990 and 2012. These are Nepal (14 years), Bangladesh (12), India (10), Indonesia (9), Mozambique (9), and Nigeria (8) (Table 21.2). All these positive developments are based, to a great extent, on the improvements made regarding the maternal mortality rate (MMR), which has been lowered a great deal particularly in these countries over the same period. For example, Mozambique has lowered its MMR by 820 deaths per 100,000 live births, Nigeria by 640, Nepal by 600, Bangladesh by 380, India by 370 and Indonesia by 240 (Table 21.3). On yet another positive front, female life expectancy at birth has reached 80 years in Vietnam, 79 in Thailand, 78 in Sri Lanka, and 77 in Brazil and China. On the opposite end of the spectrum, the Democratic Republic of Congo, Mozambique and Nigeria have female life expectancies of 53, 54 and 55 years, respectively. Both male and female life expectancy at birth is influenced a great deal by the infant mortality rate (IMR) and under-5 mortality rate (U5MR). Two countries in South Asia and two countries in Africa (among our group of countries) have achieved a great deal of improvement in relative terms (compared to their own past performance) with regard to infant mortality rates and U5 mortality rates. These are Bangladesh, Nepal, Mozambique and Nigeria. Hence, while India is among the better performing countries in these 22 years in terms of MMR, it is not doing particularly well in terms of IMR and U5MR (Table 21.3). As positive outliers, Sri Lanka and Thailand have achieved by far the lowest mortality rates (MMR, IMR and U5MR) in the group of 15 countries examined, highlighting its social development achievement as being in a class by itself. Far and away already are the respective mortality rates for China and Brazil. In the case of Vietnam and the Philippines, it is noteworthy that these two countries performed very well in terms of IMR and U5MR, but very disappointingly in terms of MMR, with lowered their overall performance in this regard (Table 21.3). We can see in Table 21.3 that South Asian countries like India reveal on average much higher mortality rates than developing countries in South Asia, and hence a much lower level of overall social development. When looking yet again closer to the U5MR, we see that the main reasons for deaths of children under the age of 5 vary a great deal. HIV/AIDS is a main problem in the three African countries included, plus Thailand, and recently also Vietnam and Indonesia, but not India. Diarrhea is a major mortality factor in most countries covered, with somewhat lower rates of causes of death of children under 5 in Sri Lanka, Brazil, Thailand and China. The conditions regarding diarrhea improved across the board among the countries under scrutiny (Figures 21.1–21.2), also in India. Measles is still a mass killer in Thailand, Pakistan, Nigeria, Bangladesh, India and Vietnam (amounting to 1–2 percent of total causes of deaths of children below 5 years of age, which amounts to millions of lives lost).The highest rates are reported in Myanmar (4% of total causes of deaths of children under 5), Indonesia (4%), DR Congo (4%) and Nepal (9%).The time comparison in Figures 21.1 and 21.2, reveals great progress with regard to saving tens of millions of lives due to measles prevention, across most countries apart from Nepal (with more limited progress there). When it comes to malaria, we can see that improvements have been made over the last two decades, but also that malaria is a notorious mass killer especially in African countries like the three covered in this comparison (Figures 21.1–21.2). The situation regarding improved drinking water has been positive in India in the past, increasing to 93 percent of people with access to improved drinking water, up from only 70 percent two decades earlier. Even though, over the period of observation (1990–2012), the access to improved sanitation has been doubling in India, it still stands at 36 percent of total population (Table 21.4), making the sanitation problem the second most severe social problem in India, after child malnutrition. 357

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Millions of people in the developing and the not yet developing world are dying every year due to the use of solid fuels for cooking (causing the problem of smoky kitchens) and heating. In India, still 63 percent of population in 2012 used solid fuels for cooking and heating, similar to the rate of Pakistan (62%). Solid fuel for cooking and heating is a mass killer in most countries covered. Particularly dire is this problem in Sri Lanka (74%), Nigeria (75%), Nepal (80%), Bangladesh (89%), Myanmar and the Democratic Republic of Congo (93%) and Mozambique (95%) (Table 21.4). Table 21.4 looks at additional major causes for the burden of disease. Here, it becomes obvious how desperate the situation is for India’s children in terms of malnutrition, as the percentage of underweight children under the age of 5 is the highest among all 15 countries covered in this comparison, also the three extreme poor African countries: Mozambique, the Democratic Republic of Congo and Nigeria. The problem of child malnutrition is also rampant in neighboring countries of India, like Bangladesh, Pakistan, Nepal, Myanmar and Sri Lanka, but India holds a sad negative record in this respect (Table 21.5). With respect to alcohol consumption, India is in the middle of the field, due to a relatively large share of Muslim population in India (about one-quarter). Primarily Muslim countries do, of course, exceptionally well, with regard to their extremely low levels of overall alcohol consumption. But, this is more often than not compensated by higher levels of smoking, e.g. in the case of Indonesia, where 67 percent of men smoke. Both alcohol consumption and smoking are primarily a male phenomenon, which causes the larger differences between female and male life expectancy rates at birth (see Aspalter, 2017).

Which way to go for the Indian welfare state system? Some suggestions The Indian welfare state system is being diagnosed with manifold severe problems, each of which poses obstacles to a longer life expectancy of hundreds of millions of people. Some are direct, others are indirect, but in the end they are all the same deadly or devastating at least. First, social policy making in India is tremendously fragmented. This very high degree of fragmentation provides ample room for and directly encourages corruption (diverging food supplies and financial resources, pushing up or exaggerating costs, excessive profit-taking and excessive administrative remunerations, etc.). Moreover, this fragmentation is causing the administrative costs to explode, due to problematic communication and coordination of a multitude of different offices and authorities, and the diversity in each different state and union territory thereof. Also it is causing, more often than not, (1) that the job that a particular social policy or program is trying to achieve does not get done, (2) that it is not being supervised, (3) that it is not evaluated and (4) that it is not improved over time – thus, losing multiple opportunities to improve the welfare of the people and save lives from misery, poverty, illness and premature death. As a result, social policy making in India needs to be centrally managed, evaluated and improved. Hence, programs need to be centrally managed and administered as much as possible, especially if coherent (offering the same administrative structures and procedures), smooth and efficient social welfare administration is not, in fact, being offered by the states and union territories themselves. Second, the Indian welfare state system’s greatest weakness is the lack of food security, especially for children. It is only one area of the great conundrum of distorted development in India, which is proud of becoming a global economic powerhouse and is home to the greatest number of hungry and famished children in the world. Distorted development is understood as a glaring gap between economic and social development, where high or higher economic development 358

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is paired with lower or the lowest levels of social development (see Midgley, 1995, 2008, 2013; Tang, 2000, 2006; Peebles, 2013). Distorted development is manifested not only in poverty, deprivation, low health status and inadequate housing but in the exclusion of sections of the population from full participation in development. (Midgley, 1995: 5) The high rate of U5 child mortality rate and infant mortality rate in India is, to a large extent, the outcome of this shameful fact of undernourishment of hundreds of millions of children in a vast, rich economy, which India is. In our study mentioned earlier, India ranks poorly in terms of social development when compared to even other very poor and developing countries, but at least India fared relatively better (i.e. less worse) than large troubled countries in Africa like Mozambique, the Democratic Republic of Congo, and Nigeria (Tables 21.2–21.4). But, in the case of children’s malnutrition and hunger, India fares even much worse than those highly troubled non-developed (i.e. not yet developed) African countries (Table 21.5). The government needs to act decisively and once and for all stop hunger and famine among children and the very poor. Especially, three warm meals a day for crèches, kindergartens, and primary and secondary schools, with specified and enforced nutritional value and balanced diversity thereof, needs to be implemented nationally, especially starting from the poor and marginalized geographic zones (such as remote areas, borderline areas, hillside and mountain areas). Furthermore, the TPDS needs to be upscaled and made corruption-proof, for example by not using private contractors for transport and distribution centers, employing undercover investigators, and setting up a federal policy unit especially entrusted and equipped to extinguish and prevent corruption, cheating and illegal and unethical profiteering of any kind. The government needs with great care to make sure that the newly legislated Right to Food Act will translate into a reality of a universal right to food, and not just a political (or legislative) promise and that it will be implemented uniformly, everywhere to the same extent and without corruption and artificial cost explosions on the way. Third, the lack of universalization of health care services (also costs of treatments and hospitalization, etc.), as well as universal and educational equality needs to be enforced, by simple (simple to understand, and simple to enforce) nationwide legislation, like free health care coverage (all treatments, all medicines, no time limit, no co-payments of any kind) in any public for all children and youth under e.g. 20 years of age (and all senior citizens, above, e.g. 65, 75 or 85 years of age). A new Three Warm School Meals Program would increase school attendance of pupils, and now the government would also need to increase the quantity and quality of teachers and their actual teaching in class (based on outcome indicators and nationwide standardized tests that can on a regular basis compare and rank the performance of teachers, schools, cities and states and union territories altogether. Fourth, even if one has the best health care system in the world, the situation on the ground is still rather hopeless if a sanitation system is not in place. India as a whole has one of the worst standards of sanitation in the world, leading to countless health care problems (turning most of the countryside and cities into cesspools of diseases), and leading to a lack of social development and social quality that the people of India deserve. Soap for washing hands, toilet paper, running water and sewage systems are basic human needs that help to save lives, as does a highly trained nurse or doctor. It is certainly not just a matter of pride, but survival for the majority of the over 1.2 billion people of India, and it is the responsibility of the government, and hence that of social policy, to provide an end to dehumanization among increasing international renown and fast-growing wealth.The PDS could provide hygiene articles, 359

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but the government needs to build directly (i.e. by itself, not through private contractors) sewage and toilet infrastructures, all across the country; and, again, also here, watch out to curb corruption in the process in any way, by all means possible and perceivable. Fifth, South Korea could serve, for example, as a vital showcase of how to set up governmental think tanks and research institutes in the area of social policy. South Korea has arguably the best and most comprehensive system of think tanks and governmental research institutes in the world with the best permanent, highly frequent formal, and informal, integration and cooperation between the presidential palace (the Blue House), the government ministries and offices and these research facilities, and the rest of academia in policy making (especially social policy) that I have seen and that I am aware of (and for which I was lucky to have been able to work for directly, in the area of pensions and health care policy), that support the policy making processes, evaluation and planning on a constant, comprehensive and most professional basis.The South Korean government employs thousands of social policy experts and experts in related disciplines, most of whom hold a PhD degree from overseas. Also, in social policy hundreds of additional professors from universities, up and down South Korea, are involved frequently in highly remunerated government research grants and projects, and being consulted frequently, many even daily, directly – both formally and informally – from the highest levels of the government and from most members of Parliament. South Korea served as a preferred model to droves of government ministries and agencies from Central Asia, South Asia and Southeast Asia in the past two decades, who see South Korea (and not Japan) as a key role model and player in social policy making in the development context (having been very poor up to the 1960s and 1970s itself), and hence thousands of government officers from other developing parts of Asia (e.g. Kazakhstan, Sri Lanka, Myanmar, the Philippines) have come to visit and learn from South Korea in the past two decades in the area of public policy and social policy alike. India (like most countries in the world) is missing such a system of government support, in the area of social policy, as well as other public policy areas. India can certainly afford such professional public policy and social policy support, and also has plenty of researchers to develop and to choose from (on a competitive basis). This would enable the government to gain legitimacy (and electoral victories), move forward social development and raise the economic competitiveness of India – while at the same time save the lives of tens and hundreds of millions of people of India from poverty, misery and premature death, with each major integrated social policy and public policy initiative. Sixth, India needs to employ in addition a whole new repertoire of innovative and integrated social policy strategies that decrease diswelfare and dehumanization (see Mohan, 1985a, 1985b, 1993, 1996; Aspalter, 2006; S. Singh, 2008a, 2008b) in a curative and preventative manner, increase welfare and well-being from a life-cycle perspective, and push forward with comprehensive, integrated, output-oriented social development policies and policies that enable the institutional framework and environment (e.g. a uniform social welfare administration structure in and throughout all states and union territories, Aspalter, 2003a, 2003b; see Saxena, 2013) needed to achieve and maintain such progress in the social development of India. That repertoire would then include, for example “social policy marketing” strategy that aims to alter and guide personal behaviors for a better social development and better welfare of the people and the society as a whole. New social policy strategies (or social policy areas) could (and should) play a major role in any such compound (integrated) social policy drive towards more social development (Aspalter, 2010, 2014, 2015, 2016, 2017; Midgley and Aspalter, 2016), such as: 1

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“communicational social policy” (using old and new media, e.g. movies and TV series by changing their content/storyline, or advertisements in the public interest, APIs, on radio,

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TV, and the internet,Twitter, and so forth to make social policy and to achieve social policy objectives) in areas like child nutrition, family education, health care policy, and mental health policy, and so forth; 2 “environmental social policy” (i.e. using the physical and natural environment and environmental policy to make social policy and to achieve social policy objectives) in the rural and the urban (slum) context especially in the area of sanitation, for example; 3 “cultural social policy” (using cultural activities, artifacts, cultural education, and cultural policy to make social policy and to achieve social policy objectives) especially in the areas of hygiene and sanitation, for example.

Conclusions All in all, the situation of India, with regard to social problems and the overall status of social development (especially when compared to its fast rising economic status) is still appalling, to say the least, also when compared to neighboring South Asian and Southeast Asian countries, many of whom have done a much better job than India (particularly Thailand and Sri Lanka). But hope is on the horizon, as recent initiatives towards universalism and a series of policy advances of the past 10 years or so clearly point into the right direction – a direction of state intervention especially in the realm of social policy. India is in need of a new grand strategy in social policy. As the findings of this chapter revealed, India needs a modicum of new social policies, which would include a mix of strong universalism, especially in public health care provision (including mental health) and public education provision, and a unified, nationwide state-run provident fund system (which is cheaper and hence more efficient) as the core for old-age income security. Furthermore, a consistent, nationwide approach to anti-poverty and especially nutrition and food safety policy and programs (e.g. the “good CCTs” based only on non-economic targeting, or NET, see Aspalter, 2016), is needed to forge ahead with social policy as a decisive instrument to guide, shape, and substantiate the social development of India. NET-based CCT programs (the “good CCTs”) need to be applied in tandem with universal social policies and services, otherwise they are “rarely effective for poverty reduction” (Cook, 2013: 18), especially when their overall budgets are tiny in comparison (see Aspalter, 2016). In addition, new innovative approaches in social policy (see e.g. Midgley and Aspalter, 2016), which have been implemented in dozens of countries first and foremost in the developing world, are to be employed systematically and strategically in an integrated manner – for the betterment of Indian society and the strengthening government legitimacy. For this, the government needs strong institutional support in the form of social policy think tanks and research institutions and personnel to help the government devise, implement, supervise and reform constantly policies and programs on the ground, which span the entire spectrum of public and social policy. These policies are very affordable in total for any developing country, some are more costly, others are not at all – but as a famous saying goes, “from nothing comes nothing.”

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——— (2003b),The Welfare State System in India, in C. Aspalter (ed.), The Welfare State in Emerging Market Economies: With Case Studies from Latin America, Eastern-Central Europe and Asia, Casa Verde: Taoyuan, Taiwan. ——— (2006), Freedom, Dehumanization and Welfare: An Asian Perspective, Journal of Comparative Social Welfare,Vol. 1, No. 2, pp. 95–114. ——— (2010), Towards “Human Capital Solidarity”: Emphasizing Justice in the Distribution of Physical, Mental, Social and Cultural Capabilities: A Normative Study in Social Policy, ISSA International Social Security Association, Geneva, Global Research Conference, Luxembourg, Sept. 30. ——— (2014), Social Work Services and Developmental Social Policy, in C. Aspalter (ed.), Social Work in East Asia, Ashgate: Surrey. ——— (2015), New Perspectives for Active Ageing: The Normative Perspective of Developmental Social Policy, in A. Walker and C. Aspalter (eds.), Active Ageing in Asia, Routledge: London. ——— (2016), Categorical and Conditional Cash Transfer Systems in Latin America and the Caribbean, in C. Aspalter and K. Teguh-Pribadi (eds.), Development and Social Policy, Routledge: Oxon, UK. ——— (2017, forthcoming), Saving Lives Through Health Care Policy: A Developmental Social Policy Perspective, in C. Aspalter, R. Gauld, and K. Teguh-Pribadi (eds.), Health Care Systems in Developing Countries, Routledge: Oxon, UK. Balani, S. (2012), Functioning of the Targeted Public Distribution System, policy guide, PRS Legislative Research, December 18. ——— (2013), Functioning of the Targeted Public Distribution System: An Analytical Report, PRS Legislative Research, December. Barura, N. (1995), Social Security and Labour Welfare in India, Ashish: New Delhi. Chowdhry, P. D. (1985), Profile of Social Welfare and Development in India, M. N. Publishers: New Delhi. Collier, P. (2007), The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It, Oxford University Press: Oxford. Cook, S. (2013), Rescuing Social Protection from the Poverty Trap: New Programmes and Historical Lessons, in K. Bender, M. Kaltenborn, and C. Pfleiderer (eds.), Social Protection in Developing Countries: Reforming Systems, Routledge: London. DSA, Dezan Shira and Associates (2013), Introduction to the Social Security System in India, http://www. india-briefing.com/news/introduction-social-security-system-india-6014.html. Esping-Andersen, G. (1990), Three Worlds of Welfare Capitalism, Polity: Cambridge, MA. FAO, Food and Agriculture Organization of the United Nations (2015), Public Distribution System in India, http://www.fao.org/docrep/x0172e/x0172e06.htm. Ferreira, F.H.G. and Robalino, D. (2010), Social Protection in Latin America: Achievements and Limitations, Policy Research Working Paper, No. 5304, World Bank: Washington, DC. Fiszbein, A. and Schady, N. (2009), Conditional Cash Transfers, World Bank: Washington, DC. Ghosh, J. (2005), Social Policy in Indian Development, in T. Mkandawire (ed.), Social Policy in a Development Context, Palgrave Macmillan: London. Goel, S. L. and Jain, R. K. (1988), Social Welfare Administration, Deep & Deep: New Delhi. Gough, I. (2004),Towards a General Theory of Welfare Regimes in Developing Countries, paper presented at the 4th International Conference on the Capability Approach: Enhancing Human Security, University of Pavia, Italy, September 5–7. ——— (2007), Policy Regimes and Wellbeing: a Comparative Analysis, paper to be presented at the conference Social Policy in a Globalizing World: Developing a North-South Dialogue, Florence, September 6–8. Gough, I., Wood, G., Barrientos, A., Bevan, P., Davis, P. and Room, G. (eds.) (2004), Insecurity and Welfare Regimes in Asia, Africa, and Latin America: Social Policy in Development Contexts, Cambridge University Press: Cambridge. ISSA, International Social Security Association (2015a), Amendments in the Employees’ State Insurance Act, http://www.issa.int. ——— (2015b), Extending Social Security Protection to Women and Street Vendors in India, http://www. issa.int. 362

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——— (2015c), The Employees’ State Insurance Corporation Extends Coverage and Enhances Health Services, http://www.issa.int. ———(2015d), Eligibility Age for Non-Contributory Pension Lowered, http://www.issa.int. ——— (2015e), India to Implement Free-Medicines-for-All Programme, http://www.issa.int. ——— (2015f), The New Pension System Expanded to All Private-Sector Workers, http://www.issa.int. ——— (2015g), Social Security Country Profiles: India, http://www.issa.int. ——— (2015h), National Rural Employment Guarantee Scheme to Be Extended, http://www.issa.int. Jagannadham, V. (1967), Social Welfare Organization, The Indian Institute of Public Administration: New Delhi. ——— (1974), Changing Patterns in Social Welfare Administration Since Independence, in S. D. Gokhale (ed.), Social Welfare: Legend and Legacy, Popular Prakashan: Mumbai, IN. Jha, R. K. and Bhattacharyya, S. (2010), Social Security System in India: An International Comparative Analysis, MPRA, Paper No. 20142, University of Munich. Kurz, S. (2001), Indien: Soziale Sicherung für Alle? [India: Social Security for All?], in J. Jäger, G. Melinz, and S. Zimmermann (eds.), Sozialpolitik in der Peripherie [Social Policy in the Periphery], Brandes & Apsel/ Südwind: Frankfurt, Germany. Lavigne, M. and Vargas, L. H. (2013), Social Protection Systems in Latin America and the Caribbean: Jamaica, ECLAC, United Nations: Santiago de Chile. Lindert, K.; Linder, A.; Hobbs, J., and de la Brière, B. (2007), The Nuts and Bolts of Brazil’s Bolsa Família Program: Implementing Conditional Cash Transfers in a Decentralized Context, World Bank: Washington, DC. Madan, G. R. (1973), Indian Social Problems,Vol. 2, Allied: Mumbai, India. McCord, A. and Meth, C. (2013), Work and Welfare in the Global South: Public Works Programmes as an Instrument of Social Policy, in R. Surender and R. Walker (eds.), Social Policy in a Developing World, Edward Elgar: Cheltenham. Mehrotra, S. (2008), Social Insurance System for India’s Unorganised Sector Workers: The Case and the Cost, Indian Journal of Labor Economics,Vol. 51, No. 2, pp. 165–177. Midgley, J. (1995), Social Development, Sage: London. ——— (2008), Developmental Social Policy:Theory and Practice, in S. Singh and C. Aspalter (eds.), Debating Social Development, Casa Verde: Taoyuan, Taiwan. ——— (2013), Social Development:Theory and Practice, Sage: London. Midgley, J. and Aspalter, C. (2016), Developmental Social Policy: Theory and Practice, in C. Aspalter and K. Teguh-Pribadi (eds.), Development and Social Policy, Routledge, Oxon, UK. Mohan, B. (1985a), Toward Comparative Social Welfare, Schenkman: Cambridge, MA. ——— (ed.) (1985b), New Horizons of Social Welfare and Policy, Schenkman: Cambridge, MA. ——— (1993), Eclipse of Freedom:The World of Oppression, Praeger: New York. ——— (1996), Democracies of Unfreedom:The United States and India, Praeger: New York. MRD, Ministry of Rural Development (2015), http://www.rural.nic.in. MSJE, Ministry of Social Justice and Empowerment (2015), http://socialjustice.nic.in. MWCD, Ministry of Women and Child Development (2015), http://wcd.nic.in. Palriwala, R. and Neetha, N. (2009), The Care Diamond: State Social Policy and the Market, Research Report, UNRISD: Geneva, Switzerland. Pedicini, J. (2011), The Two Indian Welfare Systems: State & Corporate Responses, Barnett Papers on Social Research, Dept. of Social Policy and Intervention, Oxford University. Peebles, G. (2013), India: Sick from Distorted Development, http://www.redressonline.com/2013/11/ india-sick-from-distorted-development. Punekar, S. D. and George, C. M. (1974), Twenty Five Years of Labour Legislation and Social Welfare, in S. D. Gokhale (ed.), Social Welfare: Legend and Legacy, Popular Prakashan: Mumbai, IN. Rajya Sabha, Parliament of India (2013), The Mental Health Care Bill, 2013, Rajya Sabha Secretariat: New Delhi. Rath, S. (1978), Centre-State Relations in the Field of Social Services: 1950–70, Oriental: New Delhi. Rawlings, L. B. (2004), A New Approach to Social Assistance: Latin America’s Experience With Conditional Cash Transfer Programs, Social Protection Discussion Paper, No. 0416, World Bank, Washington, DC. 363

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22 The Indonesian welfare state system With special reference to social security extension in the development context Jörg Michael Dostal and Gemati Ekacita Naskoshi

With a population of around 248.8 million (GOI, 2014a: 2), Indonesia is the fourth most populated country in the world after China, India and the US. The World Bank classifies Indonesia, with a gross national income (GNI) per capita of US$3,580 (2013), as a member of the lowermiddle-income group. The country’s political history since its emergence from Dutch colonial rule in 1945 falls into the following main periods: (1) the post-independence period of Sukarno; (2) the transition to the authoritarian New Order Regime of Suharto since 1966, which included significant economic expansion; and (3) the exit of Suharto under the combined impact of the Asian Financial Crisis of 1997/1998 and a student-led democratization movement in 1998. Following a democratic transition process, the country has been led by Abdurrahman Wahid (1999–2001), Megawati Sukarnoputri (former vice president who took over from Wahid for the second half of his statutory five-year presidential term), Susilo Bambang Yudhoyono (2004– 2014, two terms, and the first president elected in a popular vote since 1945) and Joko Widodo (since 2014). The history of Indonesia’s welfare system can be briefly sketched as follows: (1) formal welfare state policies were largely absent until the early 1960s; (2) during the New Order regime, formal welfare policies were expanded to cover public employment sectors, and there was also some limited expansion of anti-poverty programs; (3) the Asian Financial Crisis nevertheless highlighted the general inadequacy of welfare policies in Indonesia; and (4) after transition to democracy, aspirations to significantly expand and transform the welfare system started to influence policy making. In this larger context, Law No. 40/2004 on the National Social Security System or Sistem Jaminan Sosial Nasional (SJSN) was introduced. This significant framework law initiated for the first time a process to implement universal and compulsory social security for all citizens and residents of Indonesia, which is currently ongoing. As already indicated, the establishment and development of social security systems in Indonesia after independence was slow. During the Sukarno period, formal social security was limited to provisions covering certain industrial accidents. During the New Order regime, the 365

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implementation of social security programs was highly segmented, resulting in partial coverage of certain formal sector workers. Only the civil servants, military and police personnel enjoyed a certain degree of social security coverage. On the other hand, workers in the formal private sector were often not covered. Larger companies were more likely to offer coverage to workers compared to smaller companies. Finally, the majority of Indonesian workers in the informal sector, heavily concentrated as an agricultural workforce in rural areas, were not covered by any kind of social insurance. Because of their low incomes close to subsistence levels, most informal sector workers had to prioritize their everyday basic needs or expand their home industries or businesses, rather than save income or contribute to social insurance schemes. In reaction to the Asian Financial Crisis, Indonesia began to focus on social assistance programs and poverty relief.The initial consideration was to quickly respond to the suffering brought about by the crisis. However, the rise in the poverty rate could not be stopped by the proliferation of social assistance programs and problems with targeting questioned their relevance. This experience resulted in President Wahid’s initiation of social security reform, and the concept of the development of a national social security system was deliberated on in the Annual Meeting of the People’s Consultative Assembly (Majelis Permusyawaratan Rakyat or MPR), the highest representative body in the country, in 2000.The reform was in principle accepted by the same body in 2002, and the 1945 Indonesian Constitution was amended. In this amendment, a new Article 28H, Subsection 3 stated that “Every person shall have the right to social security to develop oneself as a dignified human being,” while Article 34, Subsection 2 suggested that “The state shall develop a social security system for all the people and shall empower the vulnerable and poor people in accordance with human dignity” (Suryahadi et al., 2014: 8–9). Thus, the 2004 SJSN Law represents the most significant transformative effort to advance universal social security protection in Indonesia. Although implementation only started in 2014, the process, if successful, might overcome the traditional main feature of the Indonesian welfare system, namely dominance of informal and family-based welfare. Before analyzing the SJSN in further detail, the next section first explains pre-2004 policies, programs and implementation of social security in Indonesia in order to highlight its fundamental characteristics.

The development of the welfare state system in Indonesia up to 2004 The enactment of Law No. 40/2004 on the SJSN, as deliberated and agreed in 2000 and 2002 by the country’s highest legislative body, the MPR, provided a framework for social security reform.The new law transformed the existing three types of social security in Indonesia, namely social insurance schemes, social assistance programs and out-of-pocket or voluntary private social insurance (  Joedadibrata, 2012: 13). Prior to the enactment of the SJSN, the main types of social security in Indonesia covered civil servants and the formal private sector (  Joedadibrata, 2012: 13). These social insurance programs were as follows: (1) Civil Servant Insurance Savings or Tabungan Asuransi Pegawai Negeri (TASPEN); (2) Indonesian National Armed Forces Social Insurance or Asuransi Sosial Angkatan Bersenjata Republik Indonesia (ASABRI); (3) Civil Servant and Pensioner Health Insurance or Asuransi Kesehatan (ASKES); and (4) Social Insurance for Private Sector Workers or Jaminan Sosial Tenaga Kerja (  JAMSOSTEK) (see Table 22.1).

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The Indonesian welfare state system Table 22.1 List of abbreviations ASABRI ASKES ASKESKIN BLT BPJS BPJS Kesehatan BPJS Ketenagakerjaan BUMN Persero DASPERI DPBK DPPK DPLK JAMKESMAS JAMSOSTEK JHT JK JKK JPK JPS OPK PKH RASKIN TASPEN PPIP PPMP

Asuransi Sosial Angkatan Bersenjata Republik Indonesia or Indonesian National Armed Force Social Insurance Asuransi Kesehatan or Health Insurance Asuransi Kesehatan Masyarakat Miskin or Health Insurance for the Poor Bantuan Langsung Tunai or Direct Cash Transfer Badan Penyelenggara Jaminan Sosial or Social Security Administrative Bodies BPJS for Health BPJS for Workers Badan Usaha Milik Negara Persero or State-Owned Enterprise Pembelanjaan Pegawai Negeri or Civil Servant’s Welfare Fund Dana Pensiun Berdasarkan Keuntungan or Pension based on Profit Dana Pensiun Pemberi Kerja or Employer Pension Funds Dana Pensiun Lembaga Keuangan or Financial Institutions’ Pension Jaminan Kesehatan Masyarakat or National Health Insurance for the Poor and Near Poor Jaminan Sosial Tenaga Kerja or Social Insurance for Private Sector Workers Jaminan Hari Tua or Old-Age Savings Jaminan Kematian or Death Benefits Jaminan Kecelakaan Kerja or In-Works Accident Insurance Jaminan Pemeliharaan Kesehatan or Health Insurance Jaringan Pengaman Sosial or Social Safety Net Programs Operasi Pasar Khusus or Special Market Operation Program Keluarga Harapan or Hope Family Program Beras Untuk Rakyat Miskin or Rice for the Poor Tabungan Asuransi Pegawai Negeri or Civil Servant Insurance Savings Program Pensiun Iuran Pasti or Pension Program based on Defined Contribution Program Pensiun Manfaat Pasti or Pension Program based on Defined Benefit

The four social security programs were managed by four state-owned enterprises or Badan Usaha Milik Negara (BUMN), which represent a special feature of Indonesian social policy.Their management was categorized as limited liability or Persero, in which the economic orientation was supposed to be similar to private companies.1 In addition, there were also some social assistance programs that were specifically designed to target poor and near-poor people. In Indonesia, unconditional cash transfers (UTC) already existed prior to the Asian Financial Crisis, while conditional cash transfers (CCT) were implemented afterwards (Kwon and Kim, 2016). The unconditional cash transfer programs are as follows: (1) the Social Safety Net Program or Jaringan Pengaman Sosial (  JPS); (2) Health Insurance for the Poor or Asuransi Kesehatan Masyarakat Miskin (ASKESKIN), now renamed as Jaminan Kesehatan Masyarakat (  JAMKESMAS); (3) Rice for the Poor or Beras untuk Rakyat Miskin (RASKIN); and (4) Direct Cash Transfer or Bantuan Langsung Tunai (BLT). In 2007, conditional cash transfer programs were introduced in Indonesia for the first time through the Hope Family Program or Program Keluarga Harapan (PKH). In summary, social insurance is administered by four state-owned enterprises while social assistance is mostly administered by different ministries.

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The early post-independence period (1945–1966) After independence in 1945, the country did not provide any social security schemes with the exception of certain types of accident compensation (Suryahadi et al., 2014: 6). In 1963, two social security programs were established for the first time, which can be characterized as social insurance and social assistance programs, respectively. These were TASPEN, covering Civil Servant Retirement Provisions, and the Civil Servant’s Welfare Fund or Dana Kesejahteraan Pegawai Negeri (DASPERI). The former program provided retirement benefits for retired civil servants and the dependents of deceased civil servants (Esmara and Tjiptoherijanto, 1986: 54). The latter program provided social assistance to civil servant families and in the case of natural disasters. Thus, the two programs, TASPEN and DASPERI, provided some degree of social security for civil servants. The subsequent development of social security and of more comprehensive schemes remained focused on civil servants and military and police personnel (Lindenthal, 2004: 18). Most Indonesian citizens therefore continued to rely on extended families and other informal support systems for their social security.

New order government, Asian Financial Crisis, and reformation era (1966–2003) The rapid economic growth during the period from 1970 to 1996 transitioned Indonesia from a developing into a transition country. Between 1986 and 1996, average GDP growth amounted to around 7 percent per year (Sumarto et al., 2003: 4). High economic growth allowed for more comprehensive social security schemes and programs. However, social security issues were not given priority in national development agendas (the five Five-Year Development Plans or Pembangunan Lima Tahun [PELITA] between 1969 and 1994). At this stage, the focus was placed on poverty alleviation and the expansion of basic education and basic health care. In this context, community development programs, such as the President’s Instruction on Left-behind Villages, or Inpres Desa Tertinggal (IDT), and the Prosperous Family Development Program, or Program Pembangunan Keluarga Sejahtera, were put forward (GOI, 2014b: 15). In the early 1990s, laws on social security for formal sector workers were enacted for the first time covering civil servants, the military, police and formal private sector workers. The major reforms concerned the transformation of the existing TASPEN program, the abolition of the DASPERI program, and the introduction of three additional new programs, namely ASKES, ASABRI and JAMSOSTEK. Post-reform, the system consisted of four state-owned enterprises managing health, pensions, and provident funds for different categories of employees.These four social insurance programs (TASPEN, ASKES, ASABRI and JAMSOSTEK) focused in turn on civil servant pensions (TASPEN); civil service health insurance (ASKES); military, police and Ministry of Defense and Security personnel pensions (since 2013 also health insurance) (ASABRI); and provident funds, accident insurance, health care insurance and death benefits for formal private sector workers (  JAMSOSTEK). The reforms were expected to improve the implementation of social security in Indonesia. However, the focus on civil servants and the formal sector was maintained and workers in the informal sector were still not included. In addition, the gap in social security coverage between civil servants and other public sector employees, on the one hand, and formal private sector workers, on the other hand, stayed in place. The latter category of employees was only covered by a provident fund, rather than pension schemes, and the degree of coverage was very uneven. In practice, JAMSOSTEK coverage was limited to large and medium enterprises while small enterprises did not participate, although the regulations assumed mandatory coverage. 368

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As for social assistance policies, pre-1997 these were limited to targeted education and health policies. However, the dramatic impact of the Asian Financial Crisis of 1997/1998 on Indonesia triggered an 85 percent fall in the exchange value of the Indonesian rupiah against the US dollar. This currency devaluation had a significant impact on the tripling of domestic prices during this period (Sumarto and Bazzi, 2011). In addition, the Asian Financial Crisis triggered a rapid increase in unemployment and poverty levels in Indonesia, revealing that social security programs failed to deliver adequate social protection. In particular, informal sector workers and rural areas were hit hard by the Asian Financial Crisis, although poverty in urban area was also skyrocketing – poverty levels increased by 75 percent in rural areas and doubled in urban areas (Sumarto et al., 2003: 3). Thus, Indonesia’s poverty rate grew from 15 percent in mid-1997 to 33 percent at the end of 1998, and 36 million people fell into absolute poverty (Sumarto and Bazzi, 2011). The Social Safety Net or Jaringan Pengaman Sosial (  JPS) was implemented as a quick response to the crisis. Its main purpose was to provide assistance in the areas of food security, employment creation, education and health. These four main areas each had specific programs. Households categorized in the lowest and second lowest category of poverty were included in the Special Market Operation or Operasi Pasar Khusus (OPK). This food security program provided subsidized rice for poor family at a third of the then market price. Furthermore, employment creation programs, named Labor Intensive (Padat Karya), block grants to selected primary and high schools, and Health Sector JP or JPS Bidang Kesehatan, provided some limited subsidies for poor people (Sumarto et al., 2003: 6–9).

The extensions of the Indonesia social security system after 2004 As already outlined, the concern to implement compulsory and universal social security to cover all Indonesian citizens resulted in the enactment of the SJSN Law in 2004. The SJSN Law reorganized the four existing state-owned enterprises or Perusahaan Persero, that ran social security programs (TASPEN, ASKES, ASABRI and JAMSOSTEK) into one legal entity: Social Security Administrative Body or Badan Penyelenggara Jaminan Sosial (BPJS). This new BPJS is supposed to provide universal health coverage and universal social security for all citizens and for foreigners staying for more than 6 months in Indonesia. Under the BJPS, existing social security programs are reorganized into two main programs, BPJS for Health or BPJS Kesehatan, and BPJS for Workers or BPJS Ketenagakerjaan. The main purpose of the integrated social security system is to reach all citizens and employees in Indonesia. However, the SJSN implementation process has been lengthy starting only with the enactment of Law No. 24/2011 on Social Security Administering Bodies or BPJS. The 2011 law was in turn the result of a legal appeal filed by the Social Security Action Committee or Komite Aksi Jaminan Sosial (KAJS), an umbrella group of labor unions and civil society groups, which made the Indonesian Constitutional Court rule the government guilty of neglecting the implementation of the national social security system (  Joedadibrata, 2012: 12).

Pension programs Prior to the SJSN Law, pension systems in Indonesia were organized according to employment sectors, with different laws regulating different pension institutions and programs. This section explains in turn public and private pension provisions. 369

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Public sector pensions: TASPEN and ASABRI All public sector employees categorized as civil servants at the national and regional level and in universities belong to the Pension Insurance Savings or PT. Tabungan dan Asuransi Pensiun (TASPEN) Persero. The civil servants of the Ministry of Defense and Security of the Republic of Indonesia (prior Department of Defense and Security), the Indonesian Armed Forces and the Indonesian National Police belong to the Indonesian National Armed Forces Social Insurance or PT. Asuransi Sosial Angkatan Bersenjata Republik Indonesia (ASABRI) Persero. These pension schemes for civil servants and military and police personnel follow the pay-asyou-go (PAYG) model. However, current contributions are not sufficient to cover the pension payments of existing retired civil servants, and the state budget covers the annual deficit. (Public sector pensions are discussed further in the section “Welfare state system for the public sector: TASPEN, ASABRI and ASKES.”)

Private sector pensions: Dana Pensiun For private sector employees, the enactment of Law No.11/1992 on Pension Funds or Dana Pensiun has widened opportunities to voluntarily contribute to and qualify for monthly retirement pensions. Many employers might offer access to such schemes, although they are not mandatory. Dana Pensiun is a non-banking financial institution that provides two types of pension funds: (1) Employer Pension Funds or Dana Pensiun Pemberi Kerja (DPPK) and (2) Financial Service Pension Funds or Dana Pensiun Lembaga Keuangan (DPLK).The latter are organizationally separate from other banking business.2 First, the DPPK is a pension fund established, owned and managed by either individuals or employers. Two programs are offered: (1) the Pension Program based on Defined Contributions (DC) or Program Pensiun Iuran Pasti (PPIP); and (2) the Pension Program based on Defined Benefits (DB) or Program Pensiun Manfaat Pasti (PPMP). The PPIP is a program that collects contributions from workers in individual accounts and benefits derive from accumulated contributions. In the PPMP, the employer contributes and the final pension depends on a benefit formula based on working years. The employer decides which program is offered. Until mid-2012, there were 247 DPPKs overall. Out of these, 206 DPPKs or 83 percent applied PPIP, while the rest applied PPMP (GOI, 2012a: 5). The second type of pension funds is the DPLK, which is offered by banks and life insurance companies. In this program, employees and the self-employed can voluntarily join. Recently, DPLKs were offered by five banking institutions – organizationally separate from the other bank activities – and 17 life insurance companies (ASOSIASI DPLK, 2015). Most Dana Pensiun assets are invested as bank deposits and in government bonds (GOI, 2008: 7). In 2011, the Dana Pensiun assets amounted to 2 percent of Indonesia’s GDP. According to the latest available data from 2011/2012, 5.06 percent of private sector employees and self-employed workers (out of a total of 60,905,202) participated in Dana Pensiun. Table 22.2 shows the number of workers covered by the provision of the law 11/1992 on pension funds. The low participation rates are due to the voluntary character of the Dana Pensiun. Thus, many employers have not established their own Dana Pensiun for their employees (GOI, 2012a: 1–5).

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The Indonesian welfare state system Table 22.2 Number of pension fund participants Program

Description

2011

2012

DPPK

Active Passive Active Passive Total number of pension fund participants

917,011 495,816 1,467,863 202,018 3,082,708

921,134 512,726 1,688,251 223,687 3,345,798

DPLK

Sources: 2012 Statistics and 2013 Directory of Non-bank Financial Institution Pension Funds.

Health programs In order to deliver health care and services to around 248.8 million Indonesian citizens, the country relies on public and private institutions. In 2013, there were 1,562 public and 666 private hospitals, and the ratio of hospital beds was 11.2 per 10,000 people (GOI, 2014c: 35–37). In Indonesia, the most accessible health care is provided by the basic care services, termed Puskesmas. These public health centers are under the responsibility of district governments. In December 2013, there were 9,655 Puskesmas units, consisting of 3,317 inpatient units and 6,338 outpatient units (GOI, 2014c: 27). The function of Puskesmas is to provide basic health care and to provide referrals to access health care services that can only be provided by hospitals. However, this “gatekeeper” function of Puskesmas does not work in practice because patients can go directly to hospitals without Puskesmas referrals (Harimurti et al., 2013: 6). By the end of 2013, 76.18 percent of the total population were covered by health insurance under several programs (GOI, 2014d: 81). Some of these schemes are classical insurance schemes in which workers pay their own contributions, such as in the case of private sector workers, civil servants, and military and police personnel. Others are targeted at poor and near-poor people in the informal sector and contributions are covered by the national or regional governments. Thus, the programs JAMKESMAS and JAMKESDA are paid by the national and regional governments, respectively. One should note, however, that informal workers classified as “nonpoor” are excluded from access to these two programs. The various programs are implemented by public, private, and state-owned enterprise institutions (see Table 22.3). Health insurance programs for poor people will be discussed further in the next section while those covering regular workers in the public and private sector will be discussed in subsequent sections.

JAMKESMAS and JAMKESDA: health insurance for poor people Introduced in 2007, JAMKESMAS and JAMKESDA were health insurance programs for the poor and the near-poor people in Indonesia (the word “insurance” is used in Indonesian documents, although the two programs might be classified as social assistance from the point of view of comparative social policy research as they did not require contributions from those covered in the program). The source of funding for the former program was from the central government state budget, and it was managed by the Ministry of Health of Indonesia. The source of funding for the latter program was from the local government health budget and managed by local health offices.The latter program provided coverage for some of those not covered by the former program.

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Jörg Michael Dostal et al. Table 22.3 Share of total population covered by Indonesian health insurance programs No.

Programs

Number

Administrator

1 2 3 4 5

JAMKESMAS ASKES PNS JPK JAMSOSTEK JAMKESDA Various Private Insurance (noncompany provided) Armed Forces and Police Health Insurance (ASABRI) Jaminan Perusahaan (companyprovided)

36.3% 6.91% 2.93% 19.59% 1.23%

Ministry of Health BUMN Persero BUMN Persero Regional Government Private Institutions

6 7 TOTAL

0.97%

BUMN Persero

7.11%

Company

76.18%

Source: GOI (2013).

Prior to the 2007 reform, JAMKESMAS was named ASKESKIN and managed by PT. ASKES Persero. The 2007 name and management changes were due to the earlier program’s accumulation of a high debt of around IDR 1.17 trillion that had not been paid by PT. ASKES Persero to the health service providers of ASKESKIN. Because of the underfunding of the earlier program, ASKESKIN subscribers were rejected by the health service providers (Kementerian Kesehatan Republik Indonesia Pusat Pembiayaan dan Jaminan Kesehatan, 2015). After the name and management changes, the role of PT. ASKES Persero was limited to the management of membership of JAMKESMAS while the funding of the new program JAMKESMAS was turned over to the central government. Under the JAMKESMAS program, benefits were divided into four categories: (1) health care services of basic-care providers, such as Puskesmas; (2) health care services of primary-care providers, such as hospitals; (3) partially funded health care services; and (4) health care services excluded from coverage. The JAMKESMAS program, funded by the central government, provided flexible access to various public and private health care services and institutions. Around two-thirds of the participating institutions affiliated to JAMKESMAS belonged to the public sector and one-third belonged to the private sector. The program covered slightly more than a third of the total population (see Table 22.4) and its comprehensive benefits and flexible access to health care made the program attractive for major sections of the population. Many of those not covered by JAMKESMAS were covered by JAMKESDA, which provided health insurance programs funded by local governments. Their scope and coverage was determined by local government budgets and policies. Approximately 350 district governments (out of 500) provided JAMKESDA programs under various names (GOI, 2012b: 46). In order to control expenses and to provide standard health care packages, the Ministry of Health developed a coding system to classify health problems and diseases, namely the Indonesian Diagnosis Related Group (INA-DRG) (Dwicaksono et al., 2012: 11). To determine eligibility for both programs, the BPS, a national statistics bureau, assisted the Ministry of Health in identifying criteria for eligibility of the poor and near-poor households. The BPS conducted a National Poverty Census Survey (PSE05) and used a “proxy means test” with 14 asset indicators to select beneficiaries in each district (Harimurti et al., 2013: 11).

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Beginner stage service of inpatient

Outpatient facilities

Medical consultation, health check-up and health education

Basic laboratory check-up (blood, urine and feces)

Basic medical action Medicine

Beginner stage service of outpatient

Medical consultation, health check-up and health education

Basic Iaboratory check-up (blood, urine and feces)

Basic medical action

Dental treatment Pregnancy health check-up, baby and toddler health check-up

Health care services in Puskesmas and its network

Table 22.4 JAMKESMAS benefits

Medical action Advanced dental treatment

Diagnostic back-up clinic laboratory, radiology and electromedic.

Medical consultation, health check-up and health education by specialist/general practitioner Medical rehabilitation

Advanced stage service of outpatient

Medical consultation, health check-up and health education by specialist/general practitioner Diagnostic back-up clinic pathology, anatomy pathology, pathology micro laboratorium radiology and electromedic pathology. Medical rehabilitation Middle big and special surgery

Outpatient facilities

Advanced stage service of inpatient

Health care services and hospitals

Eyeglasses with the minimum correction lens+1/labr-O,5OEitylindris, maximum 50,000 DR  of doctor’s prescription Hearing aid referring to doctor’s prescription and based on efficient price referring on patients’ needs and availability in local area Moving aid crutches, wheelchair and onset referring on doctor’s prescription and approved by medical committee and appointed official

Partially funded services

(Continued )

Prosthesis Alternative treatment, acupuncture traditional medicine

General check-up

Cosmetic treatment

Treatment that does not refer to procedure and regulation

Excluded health services

Source: Jamsosindonesia (2015).

Medicine

Service and family planning program and side effect treatment (contraception tools are provided by BKKBN)

Table 22.4 (Continued)

Normal childbirth and Basic Emergency Neonatal Obstetric Service (PONED)

Advanced pregnancy check- up

Blood transfusion

Advanced service and family planning program (contraception tools are provided by BKKBN) Formularium medicine

Blood transfusion Disposal medical tools High-risk pregnancy Childbirth Basic Emergency Neonatal Obstetric Service (PONED) Emergency treatment Coverage or thalassemia patients, even though JAMKESMASE participants

Intensive treatment ICU, ICCU, PICU, NICU, and PACU Formularium medicine

Medical rehabilitation service

Health care service given during social events Fertility treatment

Health care services during natural disaster relief, Unless he/she is JAMKESMAS patient

The Indonesian welfare state system

The two health insurance programs, JAMKESMAS and JAMKESDA, were moved, on January 1, 2014, into the new BJPS for Health or BPJS Kesehatan, together with the other health insurance programs.

Family programs In 2007, the Hope Family Program or Program Keluarga Harapan (PKH) was launched as the first conditional cash transfer program in Indonesia. The program targets very poor families/ households or Keluarga Sangat Miskin (KSM)/Rumah Tangga Sangat Miskin (RTSM). It aims to achieve short-term and long-term goals, namely to reduce the household expenditure burden (immediate consumption effect) and to break the cycle of poverty (human capital development effect) (Nazara and Rahayu, 2013: 1). Recipient families must fulfill at least one of the following criteria: (1) the household includes a pregnant woman, newborn or toddler and regular pre-natal, post-natal or health check-ups are received; (2) the households includes pre-school aged children; or (3) the household includes schoolaged children (between 7 and 15 years of age) attending 9-year compulsory school programs. In addition, the program requires the woman as the primary caregiver in the family to receive the money. However, the scope of program implementation was initially limited. In 2007, only 7 provinces and 48 municipalities/cities with 387,928 very poor families were covered by the PKH program.The benefit amount was between IDR 800,000 and IDR 2,000,000 per year. In terms of targeting, poverty data deriving from the Rice for the Poor or Beras Miskin (Raskin) Program was utilized (Nazara and Rahayu, 2013: 1–3). In 2010, during the second presidency of Soesilo Bambang Yudhoyono, a target for poverty reduction was introduced to cut the number of poor families by between 8 and 10 percent by the end of 2014. Under this program, poverty was defined as an income of below IDR 308,826 (urban) and IDR 275,779 (rural) per household member (GOI, 2014a: 176). One steering team consisting of stakeholders from different sectors was formed on the basis of Decree No 15/2010 of the President of the Republic of Indonesia or Peraturan Presiden (Perpres) on Acceleration of Poverty Reduction or Percepatan Penanggulangan Kemiskinan. At the local government level, teams consisting of relevant actors were also formed. These were named National Teams for the Acceleration of Poverty Reduction or Tim Nasional Percepatan Penanggulangan Kemiskinan (TNP2K) (GOI, 2011: 4). Under the Acceleration of Poverty Reduction program, households, families and communities were targeted. As of 2012, Integrated Basic Data or Basis Data Terpadu was used to expand the program to all 33 provinces and, by 2014, PKH coverage included 3.2 million families. In addition, the amount of the benefit was also increased to between IDR 1,000,000 and IDR 2,500,000 (Nazara and Rahayu, 2013: 1–2). The TNP2K prioritizes four main strategies: (1) expansion of social security and social assistance for poor families and individuals; (2) improvement of access to basic services, such as education, health and good sanitation; (3) encouragement of skill development; and (4) support for inclusive economic growth and high employment (GOI, 2011: 12–14). According to the Indonesian government, the national and regional teams have contributed to poverty reduction in the case of 4.25 million Indonesian citizens over the last 5 years (Sekretariat Kabinet Republik Indonesia, 2014).

Current developments in social security extension Statistical data from 2013 puts the total population of Indonesia at 248.8 million and the total number of employed people by February 2014 was 118,169,922 (BPS, 2015). Thus, only about 375

Jörg Michael Dostal et al. Table 22.5 Population aged 15+ based on working status No.

Description

2004

2009

2014

1 2

Citizen Aged 15+ Labor Force a. Labor Force Participation Rate (%) b. Employee c. Open Unemployment* d. Open Unemployment Rate (%) Non-labor Force a. School Students b. Housewife c. Others

157,941,169 107,076,750 67.80

168,870,483 115,231,039 68.24

181,169,972 125,316,991 69.17

96,950,954 10,125,796 9.46

106,093,755 9,137,284 7.93

118,169,922 7,147,069 5.70

3

50,864,419 11,067,629 31,683,615 8,113,175

53,639,444 12,553,884 32,693,645 8,391,915

55,852,981 15,899,591 32,853,393 7,099,997

Note: * Definition of the category of Open Unemployment in the National Socioeconomic Survey: looking for a job, preparing their own business, hired but not starting yet. Source: BPS (2015).

Table 22.6 Population aged 15+ based on main job status No.

Main Job Status

2004

1 2

Self-Employed Self-Employed with Non-permanent Labor/ Unpaid Labor Self-Employed with Permanent Labor/Paid Labor Labor/Employee Informal Worker on Agriculture sector Informal Worker on Nonagriculture sector Family Worker/Unpaid Total

19,075,578 22,963,346

21,214,758 22,485,004

20,320,671 19,734,696

3,127,590

3,041,995

4,143,512

25,354,178 4,721,772

29,005,761 6,471,042

43,348,961 4,739,310

3,756,314

5,164,311

6,750,395

17,952,176 96,950,954

18,710,884 106,093,755

19,132,377 118,169,922

3

4 5 6 7

2009

2014

Source: BPS (2015).

half of the population in Indonesia is employed in the formal public or private sector; the other half belongs to the informal sector.Those working in the informal sector are usually not covered by social security policies. As shown in Table 22.5, the total workforce in Indonesia has grown steadily, while open unemployment has gradually decreased over time. Furthermore, Table 22.6 shows that the number of self-employed and informal workers amounts to more than half of the total labor force. Finally, Table 22.7 shows that the agricultural sector is still most significant numerically, although there has been a steady growth in public sector employment and in various service sectors.

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The Indonesian welfare state system Table 22.7 Population aged 15+ based on main working sector No.

Main Working Sector

2004

1

Agriculture, Farming, Forestry, Hunting, Fishery Mining Manufacturing Electricity, Gas and Water Construction Trading, Restaurant, Accommodation Services Transportation and Communication Financial Institution, Real Estate and Company Services Public, Social and Individual Services Total

43,149,598

44,161,280

40,833,052

1,078,124 10,858,508 232,439

1,165,710 12,587,852 215,548

1,623,109 15,390,188 308,588

4,603,674 19,609,481

4,656,263 21,992,195

7,211,967 25,809,269

5,559,324

6,044,204

5,324,105

1,142,633

1,492,683

3,193,357

10,717,173

13,778,020

18,476,287

96,950,954

106,093,755

118,169,922

2 3 4 5 6

7 8

9

2009

2014

Source: BPS (2015).

Welfare state system for the public sector: TASPEN, ASABRI and ASKES The TASPEN program (discussed earlier) provides pension benefits and old-age savings programs for all civil servants with the exception of those employed by the Ministry of Defense and Security. The recipients of TASPEN include retired civil servants and their dependents. In addition, the program provides pensions for veterans of the Indonesian national independence movement. Contribution rates of TASPEN amount to 8 percent of monthly salary. This contribution includes 4.75 percent for pensions and 3.25 percent for old-age savings ( Jamsosindonesia, 2015). Because Indonesia’s public pension system follows the pay-as-you-go formula, civil servants receive their monthly pensions out of current contributions. However, contributions are no longer sufficient to pay out pensions and the state budget funds the growing deficit each year.3 It is expected that the budget allocations for pensions will soon bypass those necessary to pay the wage bill of active personnel. ASABRI was specifically established to manage pensions of military and police personnel and of civil servants employed by the Ministry of Defense and Security. The contribution rate of ASABRI is 3.25 percent of total salary including marriage benefits (10% of basic salary) and children benefits (2% per child). In addition, the ASKES program covered health care of civil servants. It was financed by a 2 percent contribution from total salary. Before 2012, military and police personnel and civil servants in the Ministry of Defense and Security were also covered. Since then, they have been covered in a different scheme.

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Welfare state system for the private sector: JAMSOSTEK The JAMSOSTEK provided an umbrella for four social insurance programs of formal private sector workers, namely (1) Old-Age Savings or Jaminan Hari Tua (  JHT) for a lump sum payment on retirement; (2) Health Insurance or Jaminan Pemeliharaan Kesehatan (  JPK); (3) In-Work Accident Insurance or Jaminan Kecelakaan Kerja (  JKK); and (4) death benefits or Jaminan Kematian (  JK). JAMSOSTEK did not provide a pensions program offering monthly pensions in retirement. The contribution for JHT was shared between employers and employees in an asymmetric manner, while contributions for JPK, JKK and JK were paid fully by employers. In the JHT scheme, contributions were paid by the employer (3.7%) and the employee (2%). In the JPK scheme, the employer contributed 3 percent for unmarried workers and 6 percent for married workers, with a maximum premium of IDR 1,000,000.The employer-covered JKK contribution was between 0.24 and 1.74 percent of monthly or annual salary depending on the type of company or kelompok jenis usaha. Finally, the employer-covered JK contribution was 0.3 percent of monthly salary. On January 1, 2014, the total number of covered workers in JAMSOSTEK was 11.6 million. JAMSOSTEK ceased to exist as a program on January 1, 2014, when the program was turned over into the new BPJS Ketenagakerjaan.

Implementation of JAMSOSTEK Although regarded as one of the main social security programs for the formal private sector, JAMSOSTEK was in fact unable to provide sufficient benefit levels to its subscribers. In terms of health insurance or JPK JAMSOSTEK, the program did not provide comprehensive benefits for the treatment of chronic diseases or for other higher-cost treatments (GOI, 2012b: 47). Some higher-cost treatments were for the first time covered since 2012, nearly two decades after the program had started. Because of the limited benefit levels and exclusion of many health conditions from coverage, private enterprises often preferred to provide private health insurance to their employees. Another frequently criticized JAMSOSTEK program was the old-age savings program or JHT (i.e. the lump sum payment on retirement).The critics alleged that the benefits delivered at the end of the contribution period were very low, which made the public prefer to deposit their money as savings in banks or other financial institutions. In addition, JAMSOSTEK had other features that made the program fall short in terms of effective social insurance: (1) in the old-age savings or JHT, apart from the fact that the lump sum payment did not provide sufficient income during retirement, members were allowed to withdraw the balances in the case of unemployment; (2) JAMSOSTEK as a state-owned enterprise was profit oriented and held a monopoly on state-managed social security contributions; and (3) finally, there were no tax incentives to contribute to social security systems (Tambunan and Purwoko, 2002: 34).

Current trends of the Indonesian welfare state system: the 2011 BPJS law After the enactment of the BPJS Law in 2011, the supposed universal social security coverage is implemented under two main programs, BPJS for Health or BPJS Kesehatan, and BPJS for Workers or BPJS Ketenagakerjaan. Among those two main programs, BPJS Kesehatan started first,

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on January 1, 2014, based on the transformation of the earlier PT. ASKES Persero (including its assets and employees). Three programs were in turn abolished: (1) the JAMKESMAS health insurance for the poor; (2) the JPK JAMSOSTEK health insurance for the private sector; (3) and the various health insurance provisions of the military (inclusive of the personnel of the Ministry of Defense and Security) and the police personnel. All beneficiaries and participants of these previous programs have been moved into the BPJS Kesehatan (Putri, 2014: 14–15). Thus, under BPJS Kesehatan, the contribution is determined as follows: (1) for poor people, the government covers contributions fully; (2) for civil servants and those who work for the military and police, the contribution is 5 percent of salary (3 percent paid by employers and 2 percent paid by employees); (3) for private sector workers and state-owned enterprise employees, the contribution is lower and fixed at 4.5 percent of salary (4 percent paid by employers and 0.5 percent paid by employees); (4) for more than three children and for extended family members, such as parents or in-laws, the employee must pay an additional contribution of 1 percent of salary; (5) informal workers have their own scheme in which contributions are fixed, ranging from IDR 25,000 (class III benefits), IDR 42,500 (class II benefits), and IDR 59,500 (class I benefits) (these “class benefits” refers to health care services provided in hospital) (GOI, 2014e: 22–23). Because the new BPJS program is compulsory for all Indonesian citizens and foreigners who stay and work for at least 6 months in Indonesia, it means that people in the informal sector will be covered by social insurance for the first time if implementation proves to be successful. However, BPJS Ketenagakerjaan has until recently not yet included a pension program and the debate about contribution levels for pensions has been rather lengthy. Most stakeholders have agreed to an 8 percent of total salary contribution consisting of a 5 percent contribution by employers and a 3 percent contribution by employees. The new pensions program was launched in July 2015. Prior to July 2015, BPJS Ketenagakerjaan included three main programs, as follows: (1) OldAge Savings or Jaminan Hari Tua (  JHT); (2) In-Work Accident Insurance or Jaminan Kecelakaan Kerja (  JKK); (3) Death Benefit or Program Jaminan Kematian (  JK). In addition, there exists a special program for construction workers, termed Jasa Konstruksi. The JHT is a provident fund for workers. The contribution will be paid by employers (3.7% of monthly salary) and employees (2% from monthly salary).The benefit received by the worker on retirement will be the total accumulation of contributions and returns on fund investments. In turn, JKK contributions covering in-work accident insurance are fully paid by the employer and range from 0.4 to 1.7 percent of employee’s salary per month according to employment sectors. Finally, JK is a program that provides death benefits for families of current or former employee and is also funded by employers (0.3% of monthly salary). Yet the focus on regulating pensions programs and schemes based on participants’ working sectors ultimately fails to address the fact that many Indonesian workers still have no access to pensions. Public sector employees, especially civil servants, the military and police personnel enjoy pension security due to the TASPEN program. Conversely, most private sector employees face a more insecure situation because this sector includes many informal workers. Hence, enactment of the SJSN Law has started to transform regulation and implementation of the Indonesian pension system. The new pension program is under the management of BPJS Ketenagakerjaan. The new Peraturan Pemerintah (PP) Law was established to be the fundamental reference for the ongoing operations of BPJS Ketenagakerjaan and was implemented in July 2015.

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Summary and conclusion In Indonesia, implementation of social security has proceeded slowly due to the country’s economic status as transition country and its political heritage of authoritarian rule. First steps to provide social security for civil servants were undertaken in 1963 with the TASPEN and DASPERI programs. Since then, there were no significant changes until the enactment of the 1992 and 1993 Laws on the four main social security programs (i.e. TASPEN, ASKES, ASABRI and JAMSOSTEK). The reform legislation of the early 1990s still focused on civil servants, the military and police personnel. In addition, the formal private sector and especially employees in mid-sized and large enterprises were covered. Informal workers were not covered. Thus, the informal sector poses the biggest challenge in Indonesia for further expansion of social security and future implementation of universal coverage. In addition to social insurance, poor and near-poor people have also been targeted by social assistance programs. Such programs were expanded in response to the Asian Financial Crisis of 1997/1998, which triggered a dramatic increase in poverty levels and underlined the vulnerability of the poor in Indonesia. In response to the crisis, several unconditional cash transfer programs were implemented. In 2007, conditional cash transfers were also introduced for the first time with the Hope Family Program. The enactment of the 2004 SJSN Law and the implementation of universal health insurance coverage should be considered as significant transformations in the history of social security in Indonesia. It appears that the need of social security for all citizens is an ongoing concern and receives due attention. Yet the question of whether or not ambitions will be matched by state capabilities at the implementation stage can only be answered at some future point. First, as mentioned before, informal sector workers remain the biggest challenge for plans to introduce universal social security. The reason is that many informal workers are concentrated in rural areas in which informal labor is the norm. In addition, mutual solidarity in the family, neighborhood and community remains very strong and is the primary source of welfare. Thus, individuals might not be socialized to consider social welfare as an individual right and might not place high significance on social insurance institutions. Moreover, the complex geographical setting of Indonesia and high variation in the level of social development makes it difficult to gather up-to-date statistical data and distribute information on social security institutions. The socialization of actors to support such programs and to pay contributions can therefore not be taken for granted. Second, the management of the four long-standing social insurance programs, TASPEN, ASKES, ASABRI and JAMSOSTEK, has been handled by state-owned enterprises – a particularity of Indonesian social insurance implementation – and the main purpose was to generate profits. The management was designed to be similar to private companies, which was supposed to result in a more professional, effective, and transparent mode of operation. However, JAMSOSTEK was still unable to cover the entire formal private sector because the returns on investments – undertaken principally in Indonesian government debt and stateowned enterprise – lacked behind those offered by private insurance companies and transparency was missing due to limited reporting. Nevertheless, the enactment of the 2014 SJSN Law shows that greater effort is placed on the realization of universal coverage. Just as in the case of other new policies where criticism is inevitable, the new system should be judged on whether or not it achieves its purpose. In this context, the relevant stakeholders have agreed to work on road maps on health (2012–2019) and on social security for workers (2014–2019). 380

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First, the Roadmap towards National Health Security (2012–2019) has eight targets to be achieved until 2019: (1) BPJS will be able to gain public trusts; (2) the entire population of Indonesia will be covered; (3) access to health and medical services will be made more generous to cover chronic deceases; (4) health care facilities will be improved; (5) a satisfaction rate of at least 85 percent from the beneficiaries of health care facilities and BPJS for Health will be achieved; (6) at least 80 percent of health care institutions will be satisfied with the management of BPJS for Health; (7) the BPJS management should be transparent, efficient and accountable; and (8) the BJPS legislation should be reviewed again in 2019 in the light of the experience gained (GOI, 2012b: executive summary). Second, the Roadmap on the Implementation of Social Security for Workers (2014–2019) focuses on (1) covering all workers in the formal and informal sector; (2) providing equal access to benefits for all workers; (3) limiting administrative costs; (4) program resilience to crisis caused by demographic change and economy instability; (5) guaranteed transparency; (6) educating beneficiaries about the program; and (7) improving administration and service delivery. In addition, business processes and information systems should be integrated between BPJS for Workers and BPJS for Health (GOI, 2014f: 2). In conclusion, the two roadmaps set medium-term targets for universal coverage of Indonesian workers in health and pension insurance. What is at the end of this road remains to be seen after gaining more insights from the implementation process.

Notes 1 This kind of management for social security program was not in accordance with the statement in the Basic Law of the Republic of Indonesia 1945 (Putri, 2014: 12–15) but derived from Suharto’s decision in the early 1990s to make social insurance serve economic development. 2 The regulation mentions a third category of pensions, i.e. the Pensions Based on Profit of Dana Pensiun Berdasarkan Keuntungan (DPBK). However, this type of pension fund has not been implemented. 3 There is debate in Indonesia to shift from a PAYGO public pension system to a fully funded system.

References ASOSIASI DPLK (2015), http://www.asosiasi-dplk.com. BPS, Badan Pusat Statistik (2015), http://www.bps.go.id/linkTabelStatis. Dwicaksono, A.; Ari, N., and Prasetya, P. Y. (2012), Jamkesmas dan Program Jaminan Kesehatan Daerah Laporan Pengkajian di 8 Kebupaten/Kota dan 2 Provinsi, Perkumpulan Inisiatif: Bandung. Esmara, H. and Tjiptoherijanto, P. (1986), The Social Security System in Indonesia, ASEAN Economic Bulletin,Vol. 3, No. 1, pp. 53–67. GOI, Government of Indonesia (2008), Peraturan Menteri Keuangan Nomor 199/PMK.010/2008 Tentang Investasi Dana Pensiun, Kementerian Keuangan Republik Indonesia: Jakarta. ——— (2011), Percepatan Penanggulangan Kemiskinan, Sekretariat Tim Nasional Percepatan Penanggulan Kemiskinan, Sekretariat Wakil Presiden Republik Indonesia: Jakarta. ——— (2012a), Pension Fund Annual Report, Pension Funds Bureau, Capital Market and Financial Institution Supervisory Agency, Ministry of Finance: Jakarta. ——— (2012b), Peta Jalan Menuju Jaminan Kesehatan Nasional 2012–2019, Bakti Husada, Dewan Jaminan Sosial Nasional, Republik Indonesia: Jakarta. ——— (2013), Statistik 2012 dan Direktori 2013 Dana Pensiun, Otoritas Jasa Keuangan, Republik Indonesia: Jakarta. ——— (2014a), Statistik Indonesia 2014 Statistical Yearbook of Indonesia 2014, Badan Pusat Statistik: Jakarta. ——— (2014b), Perlindungan Sosial di Indonesia: Tantangan dan Arah ke Depan, Direktorat Perlindungan dan Kesejahteraan Masyarakat, Kementerian Perencanaan Pembangunan Nasional/Badan Perencanaan Pembangunan Nasional: Jakarta. 381

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——— (2014c), Profil Kesehatan Indonesia Tahun 2013, Kementerian Republik Indonesia: Jakarta. ——— (2014d), Laporan Akuntabilitas Kinerja Kementerian Kesehatan Tahun 2013, Kementerian Republik Indonesia: Jakarta. ——— (2014e), Panduan Layanan bagi Peserta BPJS Kesehatan, BPJS Kesehatan: Jakarta. ——— (2014f), Ringkasan Peta Jalan Penyelenggaraan Jaminan Sosial Bidang Ketenagakerjaan 2014–2019, Republik Indonesia: Jakarta. Harimurti, P.; Pambudi, E.; Pigazzini, A., and Tandon, A. (2013), The Nuts & Bolts of Jamkesmas, Indonesia’s Government-Financed Health Coverage Program for the Poor and Near-Poor, World Bank: Washington, DC, January. Jamsosindonesia (2015), http://www.jamsosindonesia.com. Joedadibrata, D. (2012), A Study of the Shift Towards Universal Social Policy in Indonesia, International Institute of Social Studies, A Research Paper, Erasmus University, The Hague, December. Kementerian Kesehatan Republik Indonesia Pusat Pembiayaan dan Jaminan Kesehatan (2015), http://www. ppjk.depkes.go.id. Kwon, H. J. and Kim,W. (2016),The Evolution of Cash Transfers in Indonesia: Policy Transfer and National Adaptation, Asia & the Pacific Policy Studies,Vol. 2, No. 2, pp. 425–440. Lindenthal, R. (2004), The Challenge of Social Security for All: Policy Options for Indonesia, UNSFIRILO, A Joint UNSFIR-ILO Working Paper, The United Nations Support Facility for Indonesian Recovery, Jakarta, November. Nazara, S. and Rahayu, S. K. (2013), Program Keluarga Harapan (PKH): Indonesian Conditional Cash Transfer Programme, International Policy Centre for Inclusive Growth, Research Brief, No. 42, United Nations Development Programme, Brazil, October. Putri, A. E. (2014), Seri Buku Saku 2: Paham BPJS Badan Penyelenggara Jaminan Sosial, Friedrich-EbertStiftung Kantor Perwakilan Indonesia: Jakarta. Sekretariat Kabinet Republik Indonesia (2014), old.setkab.go.id. Sumarto, S. and Bazzi, S. (2011), Social Protection in Indonesia: Past Experiences and Lessons for the Future, SMERU Research Institute, MPRA Paper No. 57893, Jakarta, March. Sumarto, S.; Suryahadi, A., and Widyanti, W. (2003), Designs and Implementation of Indonesian Social Safety Net Programs, Developing Economies,Vol. 40, No. 1, pp. 3–31. Suryahadi, A.; Febriany,V., and Yumna, A. (2014), Expanding Social Security in Indonesia, United Nations Research Institute for Social Development, Working Paper 2014–14, United Nations, Switzerland, November. Tambunan,T.T.H. and Purwoko, B. (2002), Social Protection in Indonesia, Friedrich Ebert Stiftung: Singapore.

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23 The Singaporean welfare state system With special reference to public housing and the Central Provident Fund Youyenn Teo

The Singapore state is a highly interventionist state – proactive in coordinating how public goods are produced and delivered. This intervention has not, however, entailed high levels of public spending, direct provision or universalized coverage. Similar to the East Asian cases of South Korea, Taiwan and Hong Kong, the Singapore welfare regime has been characterized in the past few decades by a strong orientation towards individual families resolving needs through their own market participation. Instead of widely cast social safety nets that also have societal redistribution effects, the state has built a welfare regime in which individual families have primary responsibility for ensuring well-being and security through lifelong employment (Holliday, 2000; Ramesh, 2000; Croissant, 2004; Aspalter, 2006; Chua, 2007; Teo, 2013a). Compared to countries in the OECD and EU which, according to Peng and Wong (Peng and Wong, 2010), spent an average of 20.5 and 27 percent of their GDP, respectively, on financing welfare and social security in the mid-2000s, state spending on these programs is significantly lower in East Asia. In the same period, Japan spent 18.6 percent of GDP,Taiwan and Hong Kong close to 10 percent, and China, Korea and Singapore less than 7 percent (Peng and Wong, 2010: 657).1 The context of a fast-aging population – brought about by low fertility and increased life expectancy – and increasing political pressure sparked by rising inequality as well as tensions around immigration, have put pressure on the state to pay greater attention to citizens’ needs for care and security. Nonetheless, relative to the significant expansions in social security witnessed in South Korea and Taiwan, the Singapore state’s approach remains relatively conservative (Croissant, 2004; Lee, 2006; Peng and Wong, 2008; Wilding, 2008). Aside from relatively low levels of spending, there are areas of social welfare, such as food security and unemployment insurance (Birdsall and Stephen, 2002), on which there has been very limited attention. This chapter illuminates the ways in which the Singapore state’s approach towards public goods, despite its recent heavy rhetoric around “social inclusion,” in fact maintains a limited sense of mutual obligations among citizens and instead institutionalizes individualism and differentiated deservedness. This is a welfare regime in which access to public housing, health care, childcare and retirement security continues to depend upon specific constellations of individualized practices. Indeed, performing “the family” in specific gendered and heteronormative ways is crucial to ensuring social security in Singapore. 383

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In what follows, I elaborate on the major characteristics of the welfare regime, with a focus on how ethics of mutual obligations are sidelined in favor of ethics of (familialist) individualism and differentiated deservedness.2 I elaborate on how this plays out in the realm of public housing. I end the chapter by reflecting on ongoing and future reforms.

Major characteristics of the Singaporean welfare state system The key features of the Singapore welfare regime, which culminate in an ethics of individualism and differentiated deservedness, sidelining any ethics of mutual obligations, can be outlined as follows: first, a strong focus on market participation and the heteronormative family; second, a high level of state coordination institutionalizing individualized access; third, residual, targeted, and conditional “help” for the low income. In this chapter, I discuss each in turn.

Centering market participation and the heteronormative family The historical trajectory of Singapore’s welfare regime shares similarities to other East Asian cases. Singapore,Taiwan, Hong Kong and South Korea developed rapidly and with high levels of state intervention in the 1970s and 1980s. The welfare regimes which developed in the context of rapid industrialization have been characterized as productivist (Holliday, 2000) and familialist (Croissant, 2004). Scholars have thus pointed out that direct spending on social welfare as well as redistribution have been relatively modest, and there has been heavy reliance on the market and families in meeting needs (Esping-Andersen, 1997).3 Despite increased pressures to reform, these productivist and familialist orientations remain in contemporary Singapore. When it comes to housing, health care, retirement and care needs, the Singapore state intervenes deeply in regulating the channels of provision and routes to access. From the perspective of any given citizen, however, these interventions do not translate into automatic access. Instead, access largely depends on individuals and their families being able to pay. There is limited societal redistribution; the ease, amount and quality of access depend heavily on individual finances. Citizens are expected and compelled to ensure that they have sufficient financial capacities by being continuous participants in the formal workforce and thereby generating both income and savings to fund housing, pay for health care services, and support retirement. Significantly, the centering of the market produces key differentiations among citizens and solidifies the importance of the individual heteronormative family – centered on heterosexual marriage as well as gendered division of labor. Men and women citizens have different roles in this schema: partly because of the wide gap that continues to exist between women’s and men’s wages (Lim, 2011; Teo, 2015a), men are compelled to ultimately be responsible for breadwinning and women responsible for the upkeep and care of the home and family. A series of public policies mediating the market and family further entrench this gendered division of labor. Lopsided maternity/paternity leave, childcare center subsidies, foreign domestic worker policies, tax relief policies, workfare policies and so forth entrench household and care labor as women’s gendered labor and wage work as men’s gendered responsibility (Teo, 2013a, 2013b). People are channeled through different life paths such that men often serve as conduits for women in accessing retirement support and health care, while women serve as conduits for the family in accessing various forms of support for childcare. To put it differently, women play key roles in doing unpaid household and care labor that enable men’s continuous participation in the labor market, and are compelled to depend on male breadwinners in accessing various public goods. 384

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Men and women who are not in marriages find it more difficult to access public housing. People who leave marriages via divorce are required to sell their public flats. Children who are borne by unmarried women receive less support and legitimacy as members of society insofar as their mothers have less maternity leave4 and no access to the Baby Bonus.5 The absence of marriage, therefore, shapes the lives of citizens in very material ways. The absence of unemployment support means that all citizens face substantial insecurity if they lose their jobs or are unable to work, either temporarily or permanently.The consequences are especially severe for those who do not have sufficient income to set aside while they are employed and, as implied earlier, are not connected to other income-earners via marriage. Because payment for public housing and health care are deeply dependent on regular income, the costs and implications for people and households without substantial savings are direct and swift. As I shall elaborate, the well-being of people when they are of retirement age also varies depending on their earning capacities while they are younger. Hence, access to public goods depends heavily on individuals’ employment patterns and earning capacities. It depends too on the formation of individual families where members take on specific heteronormative/gendered roles. I turn next to outlining how this individualized model of access, which demarcates certain practices and social identities as more deserving than others, is institutionalized.

Institutionalization of individualized access and differentiated deservedness The individualized and differentiated access to public goods in Singapore is not merely a residual outcome of free market forces without state intervention. Instead, it is deeply institutionalized and reproduced by state policies. It is well known that the Singapore state actively intervenes in managing economic development and growth in the city-state (Low, 1998; Hamilton-Hart, 2000; Rodan, 2001; Olds and Yeung, 2004; Lim, 2013b). In tandem, state institutions have been heavily involved in managing and channeling various social services (Tremewan, 1998; Ramesh, 2000; Chua, 2005; Yap, 2010). More importantly, they have put in place specific and wideranging constraints that shape the path, quality and quantity of people’s access. For starters, many national-level systems exist. There is a national education system that all citizens are required to participate in. Health care services are provided through both private and public hospitals, but the latter plays a major role (Lim, 2013a). Most housing in Singapore is built and sold through a state agency. Finally, a state institution compels and coordinates the individual savings of all employed citizens and permanent residents. With the exception of education – where subsidies are more universally applied and fees kept low6 – financing for health care, housing, and retirement are individualized through the Central Provident Fund (CPF) system. Each employed Singapore citizen or permanent resident is required to have a CPF account (Central Provident Fund Board, 2014a). A portion of their monthly salary goes into their individual accounts (with specific proportions going into each of three accounts – Ordinary, Special, and Medisave); part of this is framed as employee contributions and the other as employer contributions. The rate of contributions varies primarily by age and income.7 The money accumulated in an individual’s account can be used primarily for retirement (including investments in specified products), public housing and health care.8 Unlike pension systems in Europe, the money accumulated belongs to the individual (and in the event of death, the person(s) they bequeath their estate to). Prior to 55 years old, an individual may withdraw from his/her CPF (Ordinary) account to pay for the downpayment and monthly mortgages for 385

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housing; an account is set aside (Medisave) to finance hospitalization costs and health insurance that he/she may also tap into. After age 55, individuals may withdraw money from their accounts, but only what is in excess of a mandated Minimum Sum and a Medisave Minimum Sum; these minimum sums were put in place to prevent depletion of individual accounts at age 55.9 Since 2009, CPF members have also been enrolled in an annuity plan, CPF Life, that provides a monthly income from age 65 for as long as they live (CPFB, 2012). There is some pooled risk and an insurance component, and all who are enrolled in the CPF Life will receive some income for the rest of their lives; however, the plan’s financing structure stays within individual accounts and how much any given person receives monthly is dependent on the amount of money remaining in their account at age 55. Through the CPF, then, people’s ability to pay for public housing, health care and retirement is dependent on how long they have been able to sustain continual employment over their lifetime and their level of earnings during their wageearning years. To say that this system institutionalizes access and that this access is individualized is to point out a number of things. First, this is a mandatory system from which there is no opting out. Second, as alluded to earlier, there are very specific rules and regulations around both contribution and usage: the state sets and adjusts specific amounts of contributions to individual CPF accounts as well as specific minimum sums that have to remain in an account even upon retirement; it also requires, for example, out-of-pocket co-payments when people use their CPF to fund health services (MOH, 2013), and for CPF monies to be returned (in the proportion in which they were withdrawn) to accounts of married/divorced couples when housing is sold (CPFB, 2014b). Third, the various institutions are highly connected: buying a flat and seeking hospital treatment trigger bureaucratic interventions across agencies. Fourth, the CPF system is not set up to have societal-wide transfers, either intergenerational or cross-class; an individual’s capacity to fund their retirement, housing and health care depends largely on the salary received while employed, as well as the market behaviors of their immediate family. Finally, and perhaps less obviously, because individual CPFs have not generally been adequate (Bhaskaran et al., 2012; Hui, 2012; Ng, 2013), absent of universal benefits, individuals need to have additional individually coordinated savings, investments, personal insurance or alternative sources of income (including adult children who will support them), in order to adequately meet all their needs. The system therefore compels Singaporeans to live within these principles: individual responsibility and “self-reliance” via stable and continuous employment; general absence of social security, very minimal redistribution; and familial interdependence where “family” is also defined as an individual unit and interdependence entails specific gendered and intergenerational practices. Besides instititutionalizing individualized access through specific interventions targeting market and familial practices, a third component in the state’s construction of an ethic of individualism and differentiated deservedness is in its framing of problems of the poor.

Residual, targeted, and conditional “help”: deepening the ethic of individualism and differentiated deservedness Public housing, health care, education and retirement are not usually framed as “welfare” in the national debate. This signals, quite aptly, that none of these goods or services are universal citizenship rights. Instead, similar to other liberal regimes such as the US and UK, “welfare” often refers narrowly to aid that is economically targeted at those with low incomes. It is a term that has negative connotations of over-dependence, parasitic behavior, and exceptionalism. Unsurprisingly, then, public policy designed to address the “exceptional” – those with low incomes in 386

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a wealthy city – is designed with free-riders in mind. They are residual rather than comprehensive, narrowly economically targeted (through asset- and means-tests), and highly conditional. The Singapore state has characterized its approach towards “the needy” as one that relies on three principles: “help the needy and their families achieve self-reliance; encourage families to be the first line of support for the needy; spur community organisations to participate in helping the needy under a ‘Many Helping Hands’ approach” (MSFD, 2014c). In recent years, in the context of increasing income inequality, as well as public awareness about inequality and hence political pressure on the state, a large number of complicated schemes targeting low-income households have come into existence (MSFD, 2014a). They are targeted at increasing the income of low-wage workers (e.g. Workfare Income Supplement); at subsidizing preschool costs for low-income families (e.g. ComCare Child Care Subsidies); at assisting low-income households in times of crisis (e.g. ComCare Urgent Financial Assistance); and at subsidizing medical costs for low-income persons (e.g. MediFund). Three intertwined features of these programs are noteworthy: first, they are residual. That is, they are clearly earmarked as targeting specific groups of Singaporeans rather than part of broad, universal citizenship rights to social security. Indeed, they are explicitly framed as being for the exceptional; where most Singaporeans have done well, there is a minority that has not and that needs extra “help” (Shanmugaratnam, 2014); these schemes are for them.These are residual, corrective measures because not everything can be “left to the market” (Shanmugaratnam, 2011). Second and relatedly, they are narrowly targeted. Here, I refer to the fact that very specific sums are aimed at specific people/households within designated and narrow criteria. The Workfare Income Supplement (WIS), for example, is aimed at supplementing the income and CPF contributions of workers above 35 years old, who earn less than S$1,900 per month, and who have been employed for at least 2 months in a given 3-month period. Within this group, the amount received depends on a confluence of factors including age, income, the value of the worker’s residential property and whether the worker is in wage work or self-employed (CPFB, 2013b). Depending on where one falls on each of these, the WIS ranges from S$77.75 to S$291.00 per month (MOM/CPFB/SWDA, 2014).The programs, then, signal narrow definitions of need and corresponding bare fulfillment of need.The policies are designed to ensure that no one should be getting more than what the state has designated as their need. What is at stake here is not only that those with low incomes may not be receiving sufficient support, but that this way of framing support creates certain indignity for “recipients” through marking qualification as exceptional and for the most “needy.” Similarly, applicants to temporary cash aid through ComCare are subject to strict means tests (to ensure, primarily, that there is no wage earner at the moment) and reviewed every 3–6 months. In ongoing ethnographic research on low-income persons, I have been struck by how often my respondents – among the lowest earning 5 percent of households – spoke about not applying for “help” because the process is so difficult and, even more astoundingly, because they should “leave it for others” in greater need. This sense that state support is “help” for the most “needy,” rather than social security for all citizens, is deepened through a third feature, in which support is conditional on social identities and everyday individual practices. In particular, class-specific, gendered familial performances are key to shaping access (Teo, 2014). Support for childcare, for example, is differentiated – type of support (maternity leave, Baby Bonus, tax reliefs, subsidies); amounts of subsidies; and delivery channels (foreign domestic workers, childcare centers or kindergartens) differ – based on household income, mothers’ income, marital status of parents and employment status of mothers. For low-income women looking to access support for childcare, continuous employment is a necessary precondition. 387

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To sum up, the welfare regime in Singapore can be characterized as such: first, people are compelled to fulfill their needs for housing, health care and retirement primarily through regular participation in formal employment. By implication, there is no coordinated safety net for persons who are unemployed. Second, there is a high degree of state regulation and coordination when it comes to accessing public goods in Singapore. While social spending and redistribution are modest, institutionalization is not. State agencies, laws and policies together institutionalize what amounts to highly individualized and differentiated access to public goods. Specific heteronormative performances of the familial are also important. Finally, where there is attention to low income persons who cannot fulfill needs through market participation, this “help” is residual, targeted and conditional. Despite recent state rhetoric in the direction of “social inclusion,” then, the regime that is put into practice has a very thin sense of mutual obligation among members of society (Somers, 2008). Instead, the ethic that is produced through everyday practice is one in which everyone has to take care of themselves as individuals and individual families, and where modest support is forthcoming from the state (versus from the public) only insofar as the appropriate performances of gender and the familial are as well. In what follows, I deepen the analysis of the ethic of individualism and differentiated deservedness by detailing how these play out in the realm of public housing. I elaborate on the ways in which public housing – so often discussed as universal and having social leveling effects – is in fact an important site for the naturalization of individualism and differentiated deservedness.

Special focus: public housing The Housing and Development Board (HDB) evolved from the British colonial Singapore Improvement Trust. In the 1960s and 1970s, it embarked on a large-scale redevelopment of a new city-nation-state. By its own account, the HDB built 54,000 flats in its first 5 years, largely filling the gap between housing demand and supply at that time (HDB, 2014b). Public housing remains the main mode of housing in contemporary Singapore – more than 80 percent of the resident population (citizen and permanent resident) lives in HDB flats; a small minority live in “private” condominiums and apartments, and “landed” properties. In contrast to public housing in other cities, while the Singapore state owns the land on which flats are built, the flats themselves are mostly purchased and owned by residents (on a lease of 99 years). After the initial sale/ purchase from the HDB, and subject to a series of regulations about minimum years of domicile, flat owners are able to sell their flats, rent out their flats or transfer ownership to their families in the event of death. Home ownership rate among the resident population is high – 90.1 percent in 2012 (SDS, 2012b).10 This unusual feature of public housing as private property is tightly linked to the mandatory savings system of the Central Provident Fund. Since 1968, Singaporeans have been allowed to use CPF savings to finance housing purchases. Most Singaporeans pay for the downpayments of their flats with CPF savings accumulated in their accounts after a few years of work. They further pay their monthly installments with the funds that accrue as long as they remain employed. There are several types of flats people can buy – two-room, three-room, four-room, five-room or executive condominium. The type people buy depends on their income and CPF savings in two ways: whether they can afford a particular type, and subject to the income ceilings set by the HDB. Flat prices range quite widely – depending on size, location, and whether they are bought directly from the HDB or “resale” on the market. In the past few decades, the prices of flats have risen sharply, but at different rates again dependent on size and location. Scholars have pointed out that the public housing and mandatory savings systems of the Singapore case has important disciplining effects, particular insofar as it maintains a strong incentive 388

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to regular employment (Chua, 2007). It has also been lauded by scholars for being central to economic success insofar as it made available to the state funds for national development (Vasoo and Lee, 2001). Scholars have also pointed to public housing as ensuring some baseline of wellbeing (Yuen, 2005); homelessness, a prominent problem in many cities, is comparably minimal in Singapore. Nonetheless, the public housing system as a pillar of social security has a number of intertwined pitfalls. These can be categorized around intertwined issues of (1) risk and inadequacy; (2) inequalities; and (3) differentiated citizenship and worth. First, public housing, in drawing heavily from CPF funds, has become a de facto source for retirement security. In other words, individuals’ retirement savings have been heavily invested into housing, and it is in fact housing (and its monetization) that has become the potential source of retirement funds.Yet, there are currently limited options for retired Singaporeans to convert housing assets into stable income (Low, 2014; Ng, 2013). Moreover, as Low points out, there is inherent high risk and uncertainty in trying to catch property cycles, and luck and astuteness in property investment become factors shaping retirement security. Given the heavy depletion of CPF accounts into home ownership (Lim, 2001), it is not surprising that many current retirees do not have adequate retirement income in their CPF accounts (Ishita, 2008; Bhaskaran et al., 2012; Hui, 2012; Ng, 2013). There is a correspondingly heavy reliance on adult children for retirement income. Ng (2013) presents a series of detailed forecasts projecting pension outcomes for men and women with different educational profiles and taking into account historical changes in CPF rules and wage patterns. He concludes that the pension system in Singapore is “unlikely to be able to fulfill the objectives either of poverty avoidance for lower-educated older persons, or consumption smoothing for higher-educated persons, without considerable and in some cases implausibly high levels of support from children” (Ng, 2013: 245). The risks of insecurity and inadequate material conditions faced by Singaporeans in old age, and the challenges and pressures faced by younger people with older people to support, are thus substantial. This brings me to the second point – inequalities – because these risks are also unevenly spread. A number of inequalities surface among citizens when public housing, funded through CPF and therefore individual incomes, is so central to retirement security.11 Given the strong tethering of regular lifetime income to housing accessibility and type, it is to be expected that housing inequalities (both ownership and type/value of housing) generally map onto income inequalities. Ng (2013: 327) finds that housing ownership is much lower among elder persons with no income (at 31%) than among those with incomes equivalent to more than 2.5 times the median population work income (at 100%). It follows that the mobilizing of housing income – either through refinancing programs, through rental or sale (and “downgrading” to a smaller home or co-residence with children) – are not options equally accessible to all. These inequalities have long-term consequences: given the strong reliance on family as source of retirement income, unequal access to housing that can be monetized mean an unequal drain on the incomes, savings and well-being for future generations of retirees. Third, and central to the argument in this chapter, public housing is an important site where ethics of individualism and differentiated deservedness are played out. Through a complex of HDB and CPF policies, citizens are channeled through a narrow set of practices and sensibilities that center on the individual performing the familial appropriately; failure to do so renders one excluded in profound ways. Through negotiating various HDB and CPF rules, citizens enact in everyday practice the centrality of the economically productive individual and the individual heteronormative family, and the naturalness of unequal access to public goods. The HDB is explicit in stating that its goal and mandate is to provide “families” with homes. This is institutionalized and implemented through its qualifying criteria as well as 389

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various special schemes. To apply for a public flat in Singapore, and to enjoy subventions and grants, applicants have to meet the “family nucleus” requirement. A family nucleus can be formed by a heterosexual, married couple; by a parent-child pairing where the “child” is either above 21 years old or, in the event of divorce or death of a spouse, in the parent’s custody; or by two unmarried siblings who are orphaned (HDB, 2013b). In response to greater needs and demands for housing among the “never-married,” the HDB has since the 1990s made adjustments to its rules so that unmarried citizens above the age of 35 are allowed to buy “resale” (i.e. pre-owned) flats of a limited size. In August 2004, the cap on flat size was lifted, but unmarried Singaporeans were still limited to resale flats. In July 2013, unmarried Singaporeans above 35 years old became eligible for new two-room flats (i.e. one bedroom). Despite these adjustments, public housing is still mostly accessible to people who marry, and one-person households are a small minority. Married couples receive larger housing grants than singles, and the “Top-Up Grant” that singles receive when they “subsequently marry a first-timer citizen spouse”12 indicates that marriage is the idealized norm and is accompanied by specific benefits. The HDB-CPF system sets up an important life pathway linking employment, marriage and home ownership. The very tethering of CPF and HDB links stable employment to public housing. In addition, the HDB Fiancé/Fiancée Scheme, for example, allows two Singaporeans with intent to marry to begin their application for new flats. When their applications are successful (i.e. when there is a flat available for them), they are given 3 months to file their marriage with the Registry of Marriages (ROM) before completing the housing transaction. Signaling the state’s desire that young Singaporeans marry early and have more children, the Staggered Downpayment Scheme allows first-time applicants who are married and where one of the applicants is younger than 30 years old to pay their downpayment in two stages (HDB, 2013c). As I have discussed at great length elsewhere, young couples find themselves planning housing and marriage in tandem, and working towards and tracking their progress towards these goals by accumulating savings in their CPF accounts (Teo, 2011). Marriage and housing continue to be tethered after a couple purchases a flat: in the event of divorce, ex-spouses may no longer coown a flat; one party may keep the flat only if she/he has custody of a child. A series of complex regulations ensure that it is difficult for divorcees to either retain their flats or purchase new ones, particularly if they have been married and living in their flats for fewer than 5 years (HDB, 2013a). HDB regulations thereby provide an institutional context in which marriage is favored and the dissolution of marriage costly. Aside from keeping more unmarried Singaporeans in or at least near their natal households, public housing policies incentivize young married couples to live close to or with their parents. There is greater demand than supply in HDB flats; most people who need a flat have to get in a queue for them; the wait often spans several years. Within this queue, the HDB gives priority to married adult children and parents who apply to live either in the same flat or in two adjacent flats (HDB, 2013c).The CPF Housing Grant for Families is a S$30,000 grant given to first-time married flat buyers who purchase flats on the resale market; an additional S$10,000 is given to couples who purchase flats in the same estate or within 2 km of one of their parents’ homes.The Parenthood Priority Scheme sets aside flats for married couples with children and the Parenthood Provisional Housing Scheme provides temporary housing for families made up of married couples with children who are waiting for their HDB flats to be built.The Third-Child Priority Scheme also enhances the chances of those with more than two children. Through these various schemes and grants, married couples with either elder parents and children receive greater public support in the acquisition of housing.The schemes signal, indeed, that they deserve greater support. 390

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As Singaporeans navigate the CPF-HDB system, they are constrained by and put into everyday practice the common sense that housing is to be earned by an individual through, on one hand, market participation, and on the other, specific performances of the familial.The complex of eligibility criteria and tiered access – favoring married over unmarried citizens; prioritizing multi-generational families who are also able to afford two flats in proximity; enabling flats that are bigger or in more popular neighborhoods to go to those who have higher income13 – also naturalizes differences and inequalities. Housing is a basic need for all human beings insofar as we all need shelter. Housing ownership is also a need linked to dignity and social belonging.14 In my ongoing ethnographic work with Singaporeans living with very low income, in rental flats,15 respondents spoke of their dreams of owning flats; people who move out of rental flats into their own flats are framed as success cases, while on the other hand, narratives about downward mobility are told through stories about losing (ownership of  ) flats. That public housing accessibility is not a universal citizenship right but dependent on particular performances of heteronormativity and economic participation has significant consequences for those on the outside. For the non-married, the divorced, the gay and lesbian, the low income, citizenship is experienced as very specific and powerful exclusions. These are not merely one-time exclusions; they have persistent long-term consequences for the accumulation of wealth and income security. Perhaps even more importantly, that this most prominent of public goods is so thoroughly infused with an ethic of individualism and differentiated deservedness, and so devoid of any sense of shared and mutual social obligations, sets the tone for all Singaporeans. They shape and produce a strong sense that to be Singaporean is to do things this “normal,” “typical” “Singaporean way” and that failure to do so naturally, and unproblematically, means less access to public goods (Teo, 2010, 2011). I turn next to considering the implications of this for ongoing debates and reforms.

Current and future trends of the Singaporean welfare state system There is little doubt that, in the coming years, needs for health care, retirement support, and support for caregiving will expand. Similar to other East Asian countries, very low fertility rates in recent decades mean that future generations of retirees will have fewer children to rely on for care and income (  Jones et al., 2008). The increased costs of living in a “Global City” and periodic economic crises also point to the fact that individuals, even if they do everything “right” – acquire educational credentials, get and stay married, be and remain employed, build up extra personal savings, spend conservatively, socialize their children to expect to support them in old age and so forth, – still face considerable unknown risks. Risks of unemployment, underemployment or decreasing wages, moreover, are not evenly spread: gender matters insofar as women are much more likely than men to leave the workforce to attend to household and caregiving responsibilities; class matters, too, insofar as less educated and lower-wage workers are more replaceable and also to the extent that the jobs they are in tend to expose them to more dangers of injury, to be more physically demanding and more difficult to continue as the body ages. That the current system is inadequate and requires reform is already well established. Even state officials concede that more needs to be done to deal with the problem of Singaporeans being asset-rich but cash-poor, having used huge portions of their CPF funds for HDB flats (Lim, 2014). In recent years, increasing costs of living as well as, significantly, the huge expansion in population through immigration, have also led to displeasures among citizens. This in turn has generated greater political pressure on the state. In response, the state has taken active steps to signal its commitment to ensuring well-being and security for all Singaporeans.16 391

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Two features of its interventions stand out. First, there has been a strong focus on jobs. Second, there has been an expansion of schemes targeted at low income persons. The first set of interventions has primarily been oriented towards incentivizing employers to retain workers they may otherwise retrench. Aside from the Workfare Income Supplement, mentioned earlier in the chapter, many schemes have been introduced to subsidize companies’ payrolls when they retain older and/or low-wage workers and when their workers attend training programs. The second set of schemes, aimed at low-income households, includes short-term cash aid and subsidies for childcare and schools. As mentioned earlier, they have generally been designed as short-term measures with strict means-tests, are conditional on familial forms and practices, and are generally modest in sums. The continuities are notable. First, while there have been some gestures at ensuring some baseline meeting of needs through the CPF Life and MediShield Life – the former to provide some income in old-age commensurate with income while working, and the latter medical insurance that aims to insure all citizens and permanent residents, primarily for coverage for high-cost treatments (certain chronic illnesses, surgery and hospitalization) – there remains strong resistance to universalism. This is expressed in three ways: in discussions about the importance of forging social inclusion, almost nothing has been said or done about redistribution. On the contrary, the specter of raised income taxes continues to insert itself into state-led discussions of welfare, and ensuring Singapore’s attractiveness to global businesses by keeping corporate taxes low continues to be a high priority (Koh, 2012). Béland (2007) points out that “social exclusion” invokes a horizontal spatial metaphor, in contrast to the vertical imagery that is produced when focus is on income disparities; we see this in the Singapore case – increased prominence given to the rhetoric of “social inclusion” with minimal consideration of the power relations and exploitation that produce exclusions.The avoidance of direct discussions of inequality and the need for not merely “inclusion” but redistribution thus stymies conversations about universalism. A second way in which universalism continues to be sidestepped – even actively avoided – is through the strong commitment to finely calibrated means tests in most of the schemes that have been introduced in recent years. We see this in various subsidies for children’s education and care, in cash aid and income supplements for the low income, and in various policies that shape access to health care services. A third way in which universalism is avoided is through something less obvious: a ghettoization of the problem of poverty. In state discourse about poverty, notions about “charity,” and about those with more “helping” those with less, have become increasingly salient. In tandem with this, new specialized agencies, programs and schemes, and personnel have been constructed to deal with “the needy.” This way of framing the problem of poverty isolates it – detaches the issues and challenges faced by a small minority of the population from those faced by everyone else, and detaches the issue of poverty from the broader political economy in which it is produced. Importantly, it frames public interventions as “charity,” as “help” – in other words, beyond public responsibility – and recipients as, well, recipients, rather than as members of society with rights to certain guaranteed and universal well-being and security. Aside from continued aversion towards universalism, recent reforms also persist in affirming the centrality of the familial. As Esping-Andersen (Esping-Andersen, 1997) points out, the commitment to the familial can be positive in the sense of enabling and forging solidarities between people; viewed particularly from the perspective of women, however, their real effects have tended to be uneven burdens and forced dependence.17 In its measures to enhance employment opportunities for workers, the Singapore state has paid very little attention to disrupting gendered roles at home and gender inequalities at work. In its policies shaping “work-life harmony,” it has in fact reaffirmed the double-burden of employment and domestic responsibilities for women (Teo, 2013a). Relatedly, heteronormativity – encompassing specific performances of 392

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both gender and sexuality – remains strongly affirmed through state institutions and practice. In various policies around public housing, childcare and work benefits, mothers continue to be distinguished from fathers, unmarried mothers from married ones, and married couples from unmarried persons.There is thus little in reforms thus far that point to genuine disruption of the principle of differentiated deservedness. Recent reforms therefore do not disrupt the ethic of individualism and differentiated deservedness, both of which, I have argued, are institutionalized and rendered common sense. They continue to affirm the importance of individual practices and “choices,” and the acceptance of differences and inequalities in outcomes. In sidestepping the issue of universalism, it has made no moves towards constructing citizenship built upon an ethic of mutual obligations where there are, as Margaret Somers puts it, “reciprocal but nonequivalent rights and obligations between equal citizens” (Somers, 2008: 69).

Summary and conclusions This chapter has shown the ways in which the Singapore state’s approach towards public goods, despite its recent heavy rhetoric around “social inclusion,” in fact maintains a limited sense of mutual obligations among citizens and instead institutionalizes individualism and differentiated deservedness. This is a welfare regime in which access to public housing, health care, childcare and retirement security continues to depend upon specific constellations of individualized practices. Indeed, through the example of public housing, we see that performing “the family” in specific gendered and heteronormative ways is crucial to ensuring social security in Singapore. Recent reforms have stopped short of serious considerations of dismantling what amounts to a highly differentiated system of welfare that sees many inadequacies in meeting needs and which naturalizes individualism and social differentiation. As I have argued elsewhere (Teo, 2015b), this is important not only in the present – the extent to which needs are met – but also for shaping the politics of reform. To the extent that beliefs, practices, common sense around individualism and differentiation have become embedded in the everyday lives of Singaporeans, trying to open up conversations about universal rights, mutual obligations and redistribution is a major challenge.

Notes 1 These figures may be underestimations insofar as they do not necessarily include things like public housing, which is very important in Singapore. Nonetheless, it is fair to say that social spending in Singapore specifically and East Asia more generally is far lower than in Western Europe; see also Croissant (2004). 2 I use the term “ethics” for two reasons. First, as a reminder that what is at stake is not typology, but morality – what it is to be human and belong to a society. Second, I use “ethics” in contrast to “ideology” to signal the importance of everyday practices and the production of not just abstract beliefs but ways of being and negotiating one’s world. 3 Esping-Andersen, drawing on the case of Japan, argues that there is hybridity – a combination of “conservative-corporatist” elements and “liberal-residual” elements, wherein market participation is important and families are forced into dependencies. Here, he and others point out, however, that this forced dependence, which puts disproportionate burdens of care and insecurity on women, is not limited to Japan or East Asia; see e.g. Abramovitz (1996); Daly (2004); Gordon (1990); Haney (2002); Morgan (2006); Orloff (1996); Strach (2007). 4 The state pays for either half (for the first two children) or all (for the third and subsequent children) of married women’s maternity leave, and employers are required by law to pay for all remaining nonstate-funded portions of leave. In contrast, unmarried women’s maternity leave is entirely funded by 393

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employers and they are required to provide paid leave only for 8 of the 12 weeks mandated maternity leave, and only for up to two children (MOM, 2013). 5 The Baby Bonus consists of a cash gift of S$6,000 or S$8,000 (the former for first and second children and the latter for third and fourth), and a co-savings account where parents receive matching funds from the state when they deposit cash into an account in their child’s name.The co-savings component, also known as the Child Development Account (CDA), is a special savings account that can be used for specific educational expenses. Parents may put money into a child’s account until she/he is 12 years old. The government deposits matching funds in these amounts: up to S$6,000 for the first and second children; up to S$12,000 for third and fourth children; up to S$18,000 for fifth or subsequent children (MSFD, 2014b). 6 This does not, however, take into account the huge private tuition industry that has arisen to help students stay afloat in a competitive and examination-oriented school system that also has multiple points of sorting and stratification. The uneven ability to pay for private tuition renders this, too, a site for the reproduction of inequality. 7 In 2014, employees 50 years and younger earning more than S$750 per month had a contribution rate amounting to 36 percent of their wages (CPFB, 2013a).The amount of contributions to an individual’s account – mandatory and voluntary – is capped at S$30,600 per year. 8 For details about changes over time in CPF rules regarding contribution rates and usage, see Chua (2007); Lim (2013a); Ng (2013). 9 The Minimum Sum was introduced in 2003 and set at S$80,000 and has been set to be increased until it reaches S$120,000 (in 2003 dollars) in 2015. The Medisave Minimum Sum has been set at S$43,500 since July 2014. 10 The home ownership rate went from 29.4 percent in 1970 to 58.8 percent in 1980, to 87.5 percent in 1990, to 92 percent in 2000, and to 87.2 percent in 2010 (SDS, 2012a). 11 In 2013, the Gini coefficient for income distribution among employed resident households in Singapore, after government transfers and taxes, stood at 0.412 (0.463 before transfers) (SDS, 2013). This compares to 0.314 in 34 OECD countries (OECD, 2014) and puts Singapore at second most unequal (after Hong Kong) among developed countries (CIA, 2014). A recent report on wealth inequality, in contrast, ranks Singapore among “medium inequality” countries (at the cusp of being “high inequality”), and less unequal than some of the OECD countries (CSRI, 2014a, 2014b). This is interesting but difficult to draw conclusions from for a number of reasons: first, the authors of the report point out that wealth data is patchy and uneven – many countries, Singapore included, do not collect direct data on wealth – making comparisons across countries subject to more than the usual caveats. More importantly, even assuming the data is robust, the authors point out that wealth inequality is caused by a multitude of factors that are not uniformly important across countries – “growth rate of the economy, demographic trends, savings behavior, inheritance arrangements, general macroeconomic trends (such as globalization) and government policies affecting, for example, taxation and pension provision” (CSRI, 2014a: 121). The cases of the Scandinavian countries are instructive: while they are categorized as “high inequality,” it may well be the case that the presence of strong social security reduces the need for the middle and lower classes to accumulate assets and savings; the top groups have much more wealth primarily for business investment purposes (CSRI, 2014a: 121). In this case, “high inequality” does not necessarily indicate huge disparities in quality of life of the population. 12 “First-timer” here refers to first application for a HDB flat. 13 From a capitalist perspective, this last point is not unusual. In every city, the rich have greater access than the poor to housing; the type of housing one can buy depends on one’s wealth. The logic of private property embeds within it the common sense of unequal access.Yet, it is important to remember that, in this case, the Singapore state has a monopoly over land; that this is a small city state and there are no less-expensive cities to which people can escape; and that this is still ultimately a discussion about public housing. 14 For an insightful discussion of the central place of material goods in creating dignity and social belonging, and the high cost to dignity that people with low income bear when they cannot access what the better-to-do in a society have, see Pugh (2009). 15 The HDB rents out, at low rates, small flats to low-income families who earn less than S$1,500 per household per month. Family nucleus criteria generally apply (HDB, 2014a). 16 For a detailed analysis of recent reforms and their possibilities and limitations, see (Teo, 2015a). 17 A rich tradition of feminist scholarship illuminates this process in a variety of national contexts; see e.g. Gornick and Meyers (2009); Huber et al. (2009); Orloff (1996); Peng (2011). 394

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References Abramovitz, M. (1996), Regulating the Lives of Women, New York: South End Press. Aspalter, C. (2006), The East Asian Welfare Model, International Journal of Social Welfare, Vol. 15, No. 4, pp. 290–301. Béland, D. (2007), The Social Exclusion Discourse: Ideas and Policy Change, Policy & Politics,Vol. 35, No. 1, pp. 123–139. Bhaskaran, M.; Ho, S. C.; Low, D.;Tan, K. S.;Vadaketh, S., and Yeoh, L. K. (2012), Inequality and the Need for a New Social Compact, Background Paper, Institute of Policy Studies, Lee Kuan Yew School of Public Policy, National University of Singapore. Birdsall, N. and Stephen, H. (2002), After the Crisis: The Social Contract and the Middle Class in East Asia, in E. B. Kapstein and B. Milanovic´ (eds.), When Markets Fail: Social Policy and Economic Reform, Russell Sage Foundation: New York. CIA, Central Intelligence Agency (2014), The World Factbook, https://www.cia.gov. CPFB, Central Provident Fund Board (2012), A Simpler CPF Life: Joint New Release by Ministry of Manpower and Central Provident Fund Board, http://mycpf.cpf.gov.sg. ——— (2013a), Guide to CPF Contribution Rates from January 1, 2014, http://mycpf.cpf.gov.sg. ——— (2013b), Workfare Income Supplement Scheme (WIS), http://mycpf.cpf.gov.sg. ——— (2014a), Central Provident Fund, http://mycpf.cpf.gov.sg. ——— (2014b), What Happens if You Divorce? http://mycpf.cpf.gov.sg. Chua, B. H. (2005),Welfare Developmentalism in Singapore and Malaysia, in H.-J. Kwon (ed.), Transforming the Developmental Welfare State in East Asia, Palgrave Macmillan: London. ——— (2007), Emerging Issues in Developmental Welfarism in Singapore, in J. Lee and K.-W. Chan (ed.), The Crisis of Welfare in East Asia, Lexington Books: Lanham, MD. Croissant, A. (2004), Changing Welfare Regimes in East and Southeast Asia: Crisis, Change and Challenge, Social Policy & Administration,Vol. 38, No. 5, pp. 504–524. CSRI, Credit Suisse Research Institute (2014a), Global Wealth Databook 2014, CSRI: Singapore. ——— (2014b), Global Wealth Report 2014, http://www.credit-suisse.com. Daly, M. (2004), Changing Conceptions of Family and Gender Relations in European Welfare States and the Third Way, in J. Lewis and R. Surender (eds.), Welfare State Change: Towards a Third Way? Oxford University Press: Oxford. Esping-Andersen, G. (1997), Hybrid or Unique? The Japanese Welfare State Between Europe and America, Journal of European Social Policy,Vol. 7, No. 3, pp. 179–189. Gordon, L. (ed.) (1990), Women, the State, and Welfare, University of Wisconsin Press: Madison. Gornick, J. C. and Meyers, M. K. (2009), Institutions that Support Gender Equality in Parenthood and Employment, in J. C. Gornick, M. K. Meyers, and E. O.Wright (eds.), Gender Equality:Transforming Family Divisions of Labor,Verso: London. Hamilton-Hart, N. (2000), The Singapore State Revisited, Pacific Review,Vol. 13, No. 2, pp. 195–216. Haney, L. A. (2002), Inventing the Needy: Gender and the Politics of Welfare in Hungary, University of California Press: Berkeley. HDB, Housing & Development Board (2013a), HDB InfoWEB: Divorce, http://www.hdb.gov.sg. ——— (2013b), HDB InfoWEB: Eligibility to Buy New HDB Flat, http://www.hdb.gov.sg. ——— (2013c), HDB InfoWEB: Priority Schemes, http://www.hdb.gov.sg. ——— (2014a), HDB InfoWEB: Eligibility Conditions for Renting a Flat, http://www.hdb.gov.sg. ——— (2014b), HDB InfoWEB: HDB History, http://www.hdb.gov.sg. Holliday, I. (2000), Productivist Welfare Capitalism: Social Policy in East Asia, Political Studies, Vol.  48, pp. 706–723. Huber, E.; Stephens, J. D.; Bradley, D.; Moller, S., and Nielsen, F. (2009), The Politics of Women’s Economic Independence, Social Politics,Vol. 16, No. 1, pp. 1–39. Hui, W. T. (2012), Macroeconomic Trends and Labour Welfare: A Focus on Retirement Adequacy, in S. H. Kang and C.-H. Leong (eds.), Singapore Perspectives 2012—Singapore Inclusive: Bridging Divides, Institute of Policy Studies, Lee Kuan Yew School of Public Policy: Singapore. 395

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Ishita, D. (2008), Income Inequality in Singapore, http://www.scribd.com/doc/36618701/Income-Inequality-inSingapore-Causes-Consequences-and-Policy-Options-Ishita-Dhamani. Jones, G. W.; Tay Straughan, P., and Chan, A. (eds.). 2008, Ultra-Low Fertility in Pacific Asia:Trends, Causes and Policy Issues, Routledge: London. Koh, L. (2012), PM: Nordic Model Won’t Work for Growth in S’pore, Straits Times, June 11. Lee, E.W.Y. (2006),Welfare Restructuring in Asian Newly Industrialised Countries, Policy & Politics,Vol.  34, No. 3, pp. 453–471. Lim, A. (2014), Of Home Prices and Nest Eggs, AsiaOne Singapore, July 23. Lim, J. (2013a), Myth or Magic:The Singapore Health Care System, Select: Singapore. ——— (2013b), Singapore’s Success: After the Miracle, in R. Looney (ed.), Handbook of Emerging Economies, Routledge: London. Lim, K.-L. (2001), Implications of Singapore’s CPF Scheme on Consumption Choices and Retirement Incomes, Pacific Economic Review,Vol. 6, No. 3, pp. 361–382. Lim, L. (2011), Beyond Gender: The Impact of Age, Ethnicity, Nationality and Economic Growth on Women in the Singapore Economy, paper presented at 25th Anniversary Forum:Women’s Choices,Women’s Lives, Singapore. Low, D. (2014), Rethinking Singapore’s Housing Policies, in D. Low and S. Vadaketh (eds.), Hard Choices: Challenging the Singapore Consensus, NUS Press: Singapore. Low, L. (1998), The Political Economy of a City-State: Government-Made Singapore, Oxford University Press: Singapore. MOH, Ministry of Health (2013), Medisave, http://www.moh.gov.sg. MOM/CPFB/SWDA, Ministry of Manpower, Central Provident Fund Board, and Singapore Workforce Development Agency (2014),Workfare:Work & Train: More to Gain! http://www.workfare.sg/index.html. MSFD, Ministry of Social and Family Development (2014a), Assistance, http://app.msf.gov.sg/Assistance. ——— (2014b), Baby Bonus, http://www.babybonus.gov.sg. ——— (2014c), ComCare and Social Support Division, http://app.msf.gov.sg. Morgan, K. J. (2006), Working Mothers and the Welfare State: Religion and the Politics of Work-Family Policies in Western Europe and the United States, Stanford University Press: Stanford, CA. Ng, K. H. (2013), The Prospects for Old-Age Income Security in Hong Kong and Singapore, dissertation, The London School of Economics and Political Science, London. OECD (2014), Divided We Stand:Why Inequality Keeps Rising, http://www.oecd.org/social/soc/49170768.pdf. Olds, K. and Yeung, H. (2004), Pathways to Global City Formation, Review of International Political Economy, Vol. 11, No. 3, pp. 489–521. Orloff, A. S. (1996), Gender in the Welfare State, Annual Review of Sociology,Vol. 22, pp. 51–78. Peng, I. (2011),The Good, the Bad and the Confusing:The Political Economy of Social Care Expansion in South Korea, Development and Change,Vol. 42, No. 4, pp. 05–923. Peng, I. and Wong, J. (2008), Institutions and Institutional Purpose: Continuity and Change in East Asian Social Policy, Politics & Society,Vol. 36, No. 1, pp. 61–88. ——— (2010), East Asia, in F. G. Castles, S. Leibfried, J. Lewis, H. Obinger, and C. Pierson (ed.), The Oxford Handbook of the Welfare State, Oxford University Press: Oxford. Pugh, A. J. (2009), Longing and Belonging: Parents, Children, and Consumer Culture, University of California Press: Berkeley. Ramesh, M. (2000), The Politics of Social Security in Singapore, Pacific Review,Vol. 13, No. 2, pp. 243–256. Rodan, G. (2001), Singapore: Globalisation and the Politics of the Economic, in G. Rodan, K. Hewison, and R. Robison (ed.), The Political Economy of South-East Asia, Oxford University Press: Melbourne, Australia. SDS, Singapore Department of Statistics (2012a), Population Trends 2012, Singapore. ——— (2012b), Statistics: Latest Data, http://www.singstat.gov.sg. ——— (2013), Population Trends 2013, Singapore. Shanmugaratnam, T. (2011), Budget Statement 2011, Ministry of Finance, Government of Singapore: Singapore.

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——— (2014), Budget Speech 2014: Opportunities for the Future, Assurance for Our Seniors, Ministry of Finance, Government of Singapore: Singapore. Somers, M. R. (2008), Genealogies of Citizenship: Markets, Statelessness, and the Right to Have Rights, Cambridge University Press: Cambridge. Strach, P. (2007), All in the Family: The Private Roots of American Public Policy, Stanford University Press: Stanford, CA. Teo, Y. (2010), Shaping the Singapore Family, Producing State and Society, Economy and Society, Vol.  39, No. 3, pp. 337–359. ——— (2011), Neoliberal Morality in Singapore: How Family Policies Make State and Society, Routledge: London. ——— (2013a), Support for Deserving Families, Social Politics,Vol. 20, No. 3, pp. 387–406. ——— (2013b), Women Hold Up the Anti-Welfare Regime, in J. Elias and S. Gunawardana (eds.), The Global Political Economy of the Household in Asia, Palgrave Macmillan: London. ——— (2014), Not Everyone Has Maids: Work-Life Balance Policies and Their Class Differential Effects in Singapore, paper presented at the XVIII International Sociological Association’s World Congress of Sociology, Yokohama, Japan. ——— (2015a), Interrogating the Limits of Welfare Reforms in Singapore, Development and Change,Vol.  46, No. 1, pp. 95–120. ——— (2015b), Differentiated Deservedness: Governance Through Familialist Social Policies in Singapore, TRANS:Trans-Regional and -National Studies of Southeast Asia,Vol. 3, No. 1, pp. 73–93. Tremewan, C. (1998), Welfare and Governance: Public Housing Under Singapore’s Party-State, in R. Goodman, G. White, and H.-J. Kwon (eds.), The East Asian Welfare Model: Welfare Orientalism and the State, Routledge: London. Vasoo, S. and Lee, J. (2001), Singapore: Social Development, Housing and the Central Provident Fund, International Journal of Social Welfare,Vol. 10, pp. 276–283. Wilding, P. (2008), Is the East Asian Welfare Model Still Productive? Journal of Asian Public Policy, Vol. 1, No. 1, pp. 18–31. Yap, M. T. (2010), Social Assistance Programmes in Singapore, in J. Midgley and K.-L. Tang (eds.), Social Policy and Poverty in East Asia:The Role of Social Security, Routledge: London. Yuen, B. (2005), Squatters No More: Singapore Social Housing, paper presented at World Bank Third Urban Research Symposium: Land Development, Urban Policy and Poverty Reduction, Brasilia, April 4–6.

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24 The Chinese welfare state system With special reference to aging of society and social policy Carmel K. M. Lee

Over the past 30 years, impressive and sustained economic development has transformed China from one of the world’s poorest countries into the second largest national economy. But growth has come at the price of a widening income gap: China’s Gini coefficient of family income distribution increased from 0.3 in the early 1980s to 0.49 in 2008 (Sicular, 2013). Starting from 1978, a series of large scale economic and social reforms, mainly of a neoliberal nature, had been carried out under Deng Xiaoping (Guan, 2000), which represented a radical departure from Mao Zedong’s ideal of “near-egalitarianism” (Solinger, 2005). In contrast to the central planning tradition of the previous era, more emphasis was put on decentralization and marketization in the reforms. The Chinese Central Government had then tried to reduce its roles in financing and provision of services and devolved these responsibilities to the local governments, and to utilize the market mechanism in achieving efficiency, cost cutting and profit maximization (Philion, 1998). In a country with a vast territory, large local variations are expected which carry great implications to formulation and implementation of social policies. These can be observed in three aspects. First of all, China geographically consists of three parts, the most developed eastern seaboard, the central provinces and the least developed western regions. The well-off cities, mainly found in the eastern seaboard, can finance more generous social programs, while the central and western parts lag behind, and some require the support from the Central Government (see Table 24.1 for diversity in Mainland China). Second, there are great disparities between the urban and rural areas. In 2010, the annual average per capita disposal income of urban residents was RMB 19,100, while for rural residents, the figure was only RMB 5,900, that is less than one-third the income of their urban counterparts (NBSC, 2011). According to one estimate, more than 10 percent of China’s total inequality can be attributed to the rural-urban gap (Xie and Zhou, 2014). The rural residents are also significantly disadvantaged in terms of education, community facilities, access to services and so forth. Third, there are about 262 million rural migrant workers (NBSC, 2013b) who moved from the countryside into the cities. Under the restrictions of the hukou (residence registration) system, both workers and their children mostly could not enjoy the benefits and social services for local residents until recently. The variations in these three aspects pose challenges 398

The Chinese welfare state system Table 24.1 Diversity in China Region

Beijing Tianjin Hebei Shanxi Inner Mongolia Liaoning Jilin Heilongjiang Shanghai Jiangsu Zhejiang Anhui Fujian Jiangxi Shandong Henan Hubei Hunan Guangdong Guangxi Hainan Chongqing Sichuan Guizhou Yunnan Tibet Shaanxi Gansu Qinghai Ningxia Xinjiang

Location Population Gross Per Capita (10,000 Regional GRP persons) Product (Yuan) (100 mill. Yuan)

No. of Persons Receiving Minimum Livelihood Guarantee (1,000 persons) Urban

Rural

Total

E E E M W E E E E E E M E M E M M M E E E W W W W W W W W W W

89 135 628 726 706 802 756 1,273 187 307 64 724 147 983 446 1,189 1,071 1,349 319 465 111 410 1,730 476 1,009 47 578 820 204 169 881

51 101 2,099 1,407 1,222 806 790 1,173 30 1,193 510 2,089 738 1,702 2,582 3,953 2,216 3,159 1,583 3,319 215 502 4,257 4,183 4,589 323 1,816 3,389 372 392 1,327

140 236 2,727 2,133 1,928 1,608 1,546 2,446 217 1,500 574 2,813 885 2,685 3,028 5,142 3,287 4,508 1,902 3,784 326 912 5,987 4,659 5,598 370 2,394 4,209 576 561 2,208

2,115 1,472 7,333 3,630 2,498 4,390 2,751 3,835 2,415 7,939 5,498 6,030 3,774 4,522 9,733 9,413 5,799 6,691 10,644 4,719 895 2,970 8,107 3,502 4,687 312 3,764 2,582 578 654 2,264

19,500 14,370 28,301 12,602 16,832 27,077 12,981 14,382 21,602 59,161 37,568 19,038 21,759 14,338 54,684 32,155 24,668 24,501 62,163 14,378 3,146 12,656 26,260 8,006 11,720 807 16,045 6,268 2,101 2,565 8,360

93,213 99,607 38,716 34,813 67,498 61,686 47,191 37,509 90,092 74,607 68,462 31,684 57,856 31,771 56,323 34,174 42,613 36,763 58,540 30,588 35,317 42,795 32,454 22,922 25,083 26,068 42,692 24,296 36,510 39,420 37,181

Life Expectancy at Birth (Years)

80.18 78.89 74.97 74.92 74.44 76.38 76.18 75.98 80.26 76.63 77.73 75.08 75.76 74.33 76.46 74.57 74.87 74.70 76.49 75.11 76.30 75.70 74.75 71.10 69.54 68.17 74.68 72.23 69.96 73.38 72.35

Notes: E = Eastern, M = Middle, W = Western. Sources: NBSC (2013a, 2014), MCA (2015).

to the formulation and implementation of social policies in ensuring adequate and equitable coverage for all. Decentralization after the reforms has further complicated the situation, particularly in policy implementation. Different from the central planning era, where the local governments had to closely follow the national targets, the Chinese Central Government now only sets the basic policy framework, while the implementation and refinement of details will much depend on local initiatives, different paces of economic development and availability of resources. Therefore it is not always certain how the central policies are implemented or whether they will be 399

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implemented at all, especially if local governments are experiencing a shortage of revenues, or having priorities different from that of the Central Government, for example selling land for commercial uses versus reserving it for public housing projects. Consequently, there may be great variations in policy implementation and uneven development of services across different localities.

Major characteristics of the welfare state system in Mainland China In the early days of the People’s Republic, social policy in Mainland China was built on the socialist economic system characterized by public ownership of the means of production, centralized planning and an egalitarian ideology (Guan, 2000). Permanent, stable jobs were offered to those working in the urban work units, while rural people’s livelihood was guaranteed by the public ownership of farmland. At the same time, large social programs existed in both urban and rural areas. In the cities, work units functioned as “mini-welfare states” that assumed “the full responsibility of taking care of all socioeconomic needs of its members” (Leung and Nann, 1995: 56–57). A comprehensive social welfare package was provided by these work units which included pension, health care, housing, schooling and childcare, and so forth, and covered more than 90 percent of the urban labor force and its dependents. The counterparts of work units in the countryside, the communes, also exhibited similar functions. The situation was described as “a high level of welfare in a low income country” (Guan, 2000: 117) that brought outstanding achievements in social development, as seen in the significant improvements in life expectancy, adult literacy rate and school enrollment (UNDP, 1995). This high level of welfare provision was regarded as an “advantage of socialist system” (Guan, 2000). However, with the advent of reforms, this “advantage of socialism” had been criticized as dragging economic development in the new era. Consequently reforms in urban social programs were initiated which led to the eventual dismantling of the Chinese “mini-welfare state” (Gu, 2000). Massive unemployment and layoffs from the state enterprises in the 1990s had also brought forward the call for new social protection mechanisms to cover those former employees. After the implementation of the household contract responsibility system as part of agricultural reforms in 1978, and the subsequent dissolution of communes in 1982, rural social programs were deprived of vital financing sources. A vacuum was created where peasants were rid of protection and services that needed to be filled by new social policies. The key approach of Chinese socio-economic reforms has always been portrayed as “wading across a river by touching the stone,” which implies that the reform is, to a large extent, “not a thoroughly predesigned process, but rather a step-by-step ‘trial-and-error’ one” (Guan, 2000: 124). Frequently, pilot or demonstration projects will be used to test the effectiveness of a particular approach and develop as models of good practice for other places to follow suit. Even if the Central Government decides to launch a reform, it is usually termed as “views” or “trial procedures” on a particular subject. Major initiatives are usually built on the existing practices that proved effective, or at least not disruptive. The implementation of a policy at the national level is usually accomplished by stages for different provinces and major cities. After 30 years of reforms, China has built up a new style of welfare state system which is drastically different from the past. The Social Insurance Law now forms the legal backbone of social protection. Welfare services are operated by “social organizations” with diverse funding sources. Nine-year compulsory education is extended to both urban and rural areas, and housing policies that cover both public housing programs and private development are now implemented in the cities. 400

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The social insurance law The Social Insurance Law of 2011 has established a comprehensive national framework which integrated previous regulations and provisions and specified the legal requirements for various social insurance systems. Under the law, both employers and employees are required to make contributions to old-age pensions, the unemployment insurance fund and the medical insurance fund. Employers must also contribute to the work-related injury and maternity insurance funds. Self-employed, non-full-time employees, and those under flexible employment can also join the basic old-age pension and basic medical insurance by making their contributions to the schemes. The country is also required to set up specific old-age pension and medical schemes for those in the rural areas. The State Council of the Central Government oversees the whole operation of the social insurance system, while the local governments are responsible for the management of various insurance funds within their jurisdictions. The funds collected must only be earmarked for the specific purpose of providing social insurance for employees and retirees, and comprehensive monitoring systems should be in place at various levels of the governments to ensure the secured and effective management of these funds. The local governments are also obliged to financially support the operation of the system and supplement the old-age pension in case of deficit. The law also states that the old-age pension and medical insurance funds should consists of pooled components, which can be used to benefit any eligible employee, and personal accounts that benefit the individual employees concerned, when they become eligible. The law also specifies the rights of portability of benefits even if the employees move to another place to live or work.

Old-age pensions As early as the 1950s, pension schemes and other generous welfare programs already existed for government employees and state enterprise workers, which were proved to be tremendous financial burdens both to enterprises and the state. Consequently, an experimental process called “socialization” was initiated in the 1980s where various pension schemes originally operated by the enterprises were transformed into “social pooling” on a locality basis to share the burdens and risks. The responsibility for management was also transferred from individual enterprises to the group of enterprises forming the pool. To further adjust the roles of various parties in old-age protection, the state decided to develop an old-age pension system for enterprise employees with contributions shared by the state, enterprises and employees. Similar to the idea of three pillars advocated by the World Bank in 1994, the system consisted of three tiers: (1) a contribution-based basic pension scheme administrated by local governments, (2) supplementary pension schemes established by the enterprises and (3) personal saving or voluntary individual pension schemes run by commercial insurance companies. The idea of “individual accounts” was later introduced and gradually evolved into the Chinese model of “combining social pooling and funded individual accounts,” a mixture of defined-benefit and defined-contribution models (Gu, 2001). In 1997, the state announced the intention to establish a unified system, the Urban Enterprise Pension Scheme (UEPS) that would extend to all urban workers. The scheme intended to standardize contribution rates, transfer the management of pension schemes from groups of enterprises to local governments, and strengthen the coordinating role of provincial governments. The ceiling for the employer’s contribution rate was set as 20 percent of the total wage, and actual rates would be decided by individual provincial governments. Employee contribution 401

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rates were 4 percent in 1997, and gradually increased to a ceiling of 8 percent. From the contributions from both employers and employees, at least 11 percent would be deposited in individual accounts (Gu, 2001). In 2011, the UEPS covered a total of 280 million urban workers (Pozen, 2013). To supplement the retirement income of those employees joining the UEPS, a voluntary fully funded scheme called Enterprise Annuity (EA) is now available as second-tier protection. In the EA scheme, an employer contributes to employees’ individual accounts, while employees can choose whether to contribute. Unfortunately, only 6 percent of those under the UEPS, 18 million employees, joined EA in 2012 (Pozen, 2013). To extend the coverage of old-age protection, a rural pension scheme was launched in 2009 to cater to the population in the countryside. It covered about 460 million individuals by 2012 (Pozen, 2013). An urban residents’ pension scheme was set up in 2011 for those in the urban population not yet covered by UEPS. Both schemes are run on a voluntary basis, but are expected to become compulsory for their respective constituents by 2020. Lastly, there is also a pension scheme that covers the 8 million civil servants who work directly for government agencies, as well as an additional 32 million employees of public institutions such as teachers, doctors and so forth. Over the years, the pension scheme is fully provided by the government, where the employees do not need to contribute but are still eligible for the benefit when they retire (Wildau, 2015).

Health care insurance In the cities before the reform, there were free health care services for state workers and government employees, inexpensive public hospital services and preventive health programs funded and organized by the government and state enterprises. In the countryside, the Rural Cooperative Medical System based on rural collective economy was set up with three tiers of services: “barefoot doctors” trained in basic hygiene and traditional Chinese medicine, township health centers, and county hospitals, with preventive health campaigns subsidized by the government. Health insurance schemes were also available in urban and rural areas (Guan, 2000). However, a series of reforms in the early 1980s, including reduction of the Central Government’s role in health care financing, decentralization of the public health system, and privatization and commercialization of health care facilities and services and so forth had produced negative impacts on the coverage, accessibility and quality of urban health care services. The dissolution of communes as a result of agricultural reforms also worked to tear down the health care safety net in the countryside. These developments necessitated new measures to fill in the gaps in health care protection. Nowadays, there are three health care insurance schemes in operation. The Urban Employees Basic Medical Insurance (UE-BMI), established in 1998, is a mandatory scheme for urban employees and administrated at municipal level. The level of contributions is 6 percent of the salary costs for employers and 2 percent of the salary of employees. The scheme is also available to others, such as the self-employed, who then pay all contributions. The scheme offers both inpatient and outpatient benefits to employees, but it does not cover all expenses or for all treatments. It also does not cover dependents, including children. The coverage rate was estimated at 67 percent of the appropriately 300 million urban employees in 2010. A voluntary scheme of the New Rural Cooperative Medical Scheme (NCMS) started to operate in 2003 to serve the rural residents at county level. The scheme coverage increased from 13 to 92 percent between 2003 and 2008 and covered a rural population of 840 million. The Urban Residents Basic Medical Insurance (UR-BMI), piloted in 2007, intended to cover 200 million urban residents not yet 402

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covered by UE-BMI, including children, students, older people, the disabled and others in the non-working population in the cities. The scheme had gradually rolled out to cover 60.4 percent of the target population by 2008 (Barber and Yao, 2010). To supplement the insurance schemes, a Medical Financial Assistance has been launched in 2003 aimed at protecting the poor from financial risks associated with high-cost diseases.

Work injury insurance The work injury insurance requires mandatory contribution by the employer, which rates are differentiated by localities, industries and enterprises, and usually depend on the risk level, injury rate and claim rate of a specific setting. Employees are eligible for claiming the insurance in case of work injury and occupational diseases, as substantiated by work ability assessment. The insurance covers medical and nursing costs, allowance for disability and work-related deaths, including funeral expenses and conditional allowances for surviving family members.Wages during the treatment period, up to 12 months will be shouldered by the employer.

Unemployment insurance The unemployment insurance is mandatory and contributed by both the employers and employees. It covers all employees and conditionally, self-employed in the urban areas. The insurance provides monthly support to the unemployed individuals under certain eligibility conditions.

Maternity insurance Maternity insurance is solely contributed by the employers. Female employees can receive a compensation for the loss of salary and for medical expenses during childbirth or while undergoing abortion.

Social assistance Before the reform, price subsidy was available for urban residents to purchase basic necessities, while the work units in government agencies and enterprises would cater for their employees and their dependents by providing stable employment and welfare. Cash benefits would also be provided to those with no working ability, no family and no other income source, collectively known as “Three Nos” targets. In the countryside, a “Five Guarantees” system was maintained by rural collectives to provide for the needs of older people and disabled who had no family support. However after the reform, the old system was found inadequate to deal with the new situation, especially in mid-1990s when the enterprises experienced mounting financial loss. Some enterprises needed to be closed down which led to massive unemployment, while those survived chose to have large-scale laid-off employees (xia-gang) who were no longer needed, but still nominally affiliated to their original work units. As they were not formally unemployed, and therefore not eligible for unemployment insurance, a basic living allowance was established to fill the gap. Nevertheless, it was clear that a new broad based approach would be required as a long-term measure to cater for these urban poor. A new scheme of “Minimum Livelihood Guarantee” (Dibao) was therefore started in 1994 in some cities and transformed into law in 1999. Cash support is provided to those urban residents who live under the locally determined poverty line. Local household registration status is 403

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normally required in order to be eligible for the support.The scheme is managed and funded by local governments, which also decide the standard of cash support according to their financial capacity as well as the amount of money required to maintain a minimum livelihood in their localities. The scheme was gradually extended to rural residents around 2004, supplementing the traditional “Five Guarantees” system to provide assistance to “extremely needy” households. Besides providing relief and assistance, the Chinese Government has also placed heavy emphasis on reforms and development as effective ways in eradicating poverty. For instance in the countryside, allocating land to the rural households in 1978, implementation of New Rural Cooperative Medical Scheme in 2003, abolition of agricultural tax and waiving of tuition and miscellaneous fees in 2006 and so forth had helped a large number of rural population to get out of poverty; for example the large number of 260 million rural poor in 1978 had been drastically reduced to 23 million in 2006. In the cities, creating employment in public and community services, providing training and small loans are the usual ways to eliminate poverty (Lu and Feng, 2008).

Welfare services Before the 1980s, besides welfare services provided by work units to their members and dependents, there was also a community-based system, which operated in a “residual approach” to serve the “Three Nos” targets such as older persons, people with disability and orphans, who could neither receive welfare services from the work units nor support from the family. Starting from 1980s, the Ministry of Civic Affairs has adopted a strategy of socialization of social welfare (Wong and Leung, 2012), with an ultimate goal of developing a more flexible and pluralistic social service system. Different from previous eras, where work units and governments provided welfare services for their own employees or destitute people in the community, non-governmental organizations and even commercial organizations are now invited to join the ranks. Incentives are provided for service operators to locate new funding sources, for example fee charging and donations. Service contracts are also drawn up for the operators to receive subsidies from the government.

Education Originally before the reform, public schools were established and financed by the government and state enterprises in the cities, with low schooling costs for students in primary and middle schools. After the reform, as the enterprises reduced their welfare role, responsibilities had been shifted to the governments. In the rural area, the dissolution of communes had left a funding vacuum for education. Consequently it was left to the peasants to pay tuition fees, who might prefer not to send their children to school for cost considerations as well as for the economic necessity of having more manpower in farm work, especially after the implementation of the household contract responsibility system where the farmer could earn more with more output. In 1986, the Law on Nine Year Compulsory Education became effective. A schedule was established for the attainment of universal education throughout the country. However, the right to receive at least 9 years of free education was not yet materialized for those children living in some economically backward rural areas, and the offspring of rural migrant workers living in the urban areas who, because of the household registration system, were denied of the chance to enjoy education as their counterparts with residency status within the cities. The Central Government remedied the situation in rural areas by sharing some of the costs with the local governments. In 2006, the state abolished all tuition and miscellaneous fees for 404

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150 million poor students in the countryside for the duration of their whole 9-year compulsory education. They also have access to free textbooks and subsidies on boarding fees (Lu and Feng, 2008). In the urban areas, some cities have gradually relaxed the rule to allow the off-springs of rural migrant workers to join local schools in recent years (Gao, 2013). According to the Key Indicators for Asia and the Pacific 2014, China had already achieved net enrollment ratios in primary education at 99 percent (ADB, 2014).

Housing Before the reform, housing had been one of the most important welfare measures in the cities. Most of the urban flats belonged to the governments and state enterprises and were distributed free of charge to their employees. Those living in these flats only paid nominal rent, which could not even cover the basic maintenance cost and had to be subsidized by the governments. Consequently this became a great drain on public resources. Therefore housing reform started as early as 1980s to solve this problem. The directions of the change were threefold, namely from the shift of housing as a welfare to that of a commodity in the market, from the provision of public rental housing to the support of private homeownership, and from over-dominance of state investment to the sharing of costs by the state, employers and individual households (Wang, 2013). After an experimental period, the Central Government outlined the new direction of urban housing development in 1988, which offered different options for different income groups. The poorest families can rent subsidized flats offered by the government.The low- to middle-income households can buy inexpensive apartments with subsidized cost and controlled price.The highincome group can either buy or rent commercial apartments at market price (Huang, 2012). Over the years, a system of subsidized housing for low- and middle-income households has been developed, including Economic and Comfortable Housing (ECH) and Cheap Rental Housing (CRH). ECH is built by developers on free land allocated by local governments, and sold to qualified households with government-controlled prices and standards. Only partial property rights are available to home owners, as there is a control on resale in the market within a limit of time. CRH is a kind of rental subsidy provided to “low-income households with housing difficulties.” It can be in the forms of housing provision with controlled rents, rent subsidies for households renting private housing on the market or rent reduction for households who already live in public rental housing. There is strict entry and exit policy. The households applying for subsidies have to pass a means test that linked to the city poverty line (Huang, 2012). To facilitate citizens in purchasing their own housing flats, Housing Provident Fund is implemented in most cities. The employees are allowed to use the savings for retirement; alternatively they can deploy the money for purchasing homes in the private housing market or from the Economic and Comfortable Housing Projects.

Special focus: aging of society and social policy Because of general health improvement and the resulted significant fall in mortality, the life expectancy had reached 75 for both sexes in China in 2012. There is also a drastic reduction of fertility rate from 6.1 in the 1950s to 2.9 in the 1970s, and eventual drop to 1.6 in 2010 (UN, 2011). The increase in longevity combined with low fertility of the population has led to rapid aging. It only takes 26 years for China to increase the percentage of the population aged 60 or above from 7 to 14 percent, while other countries like France, Sweden and the US had taken 69, 85, and 115 years respectively to attain the same percentage (UN, 2013). 405

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Three decades ago, only 5 percent of China’s population was over 65. In 2010, China had 110 million people, that is 8 percent of the total population reaching age 65 or above.This figure will increase by more than 100 million in 2030. By 2050, more than 330 million – a quarter of the Chinese population – will be over 65, far exceeding the United Nations’ 20 percent definition of a super-aged society. Moreover, the fastest growth will be observed in the oldest old segment, those aged 80 or above, which will increase from 1.4 percent in 2010 to 7.6 percent by 2050 (UN, 2011). The increasing prevalence of chronic illness probably leads to the growing number of disabled older people requiring care and assistance. It is estimated that by 2015, there will be 40 million older persons aged 60 or above having some form of disabilities in activities of daily living, and 12 million of them can be classified as “completely disabled” (Zhang, 2011). Besides the factors of industrialization and urbanization, which are usually associated with low birth rate and family nuclearization, the fast pace of aging in China is also attributed to the One-Child Policy introduced in 1979, which mainly restricts urban couples to have only one child. Although the policy had successfully slowed down the population growth and maintained economic stability in the past, its negative side effects gradually emerge. At the present moment, China still benefits from its demographic dividend, that is significant economic growth as a result of declining fertility and mortality of the country, and a large working population supporting a comparative small number of retirees (Pozen, 2013). However, the situation may become worse within a short period of time as the aging population is continuously growing while the size of the working population is projected to be shrinking, implying a fast increase in old-age dependency ratios. Furthermore, China may have already reached its Lewis turning point, when it can no longer enjoy the advantage of an abundant supply of cheap labor, because of the emerging labor shortage and the sharp rise in wages (Huang, 2013). This brings concerns as to whether the Chinese economy can continue to grow and prosper to support an ever-expanding older population. It also echoes the worries that whether China is “getting old before getting rich.” Although there has been rapid economic growth in recent decades, China is still a low-income country in terms of GDP per capita, and therefore it may not have sufficient preparation in terms of infrastructure and resources to deal with the aging issues. The reduced number of children and smaller family size also implies a weakening of family networks to care for their older members. It was found that percentage of older people living with their children reduced from 73 percent in 1982 to 57 percent in 2005 (Herd et al., 2010). Since the One-Child Policy was implemented, family size has also been reduced from 4.4 persons from 1982 to 2.98 persons in 2013 (NBSC, 2014). There is also the emergence of the “4–2–1” family structure, which implies that the only child of the family will need to support and care for two parents and four grandparents in the future (EC, 2011). The trend of rapid population aging brings great challenges to three social policies that are closely associated with life expectancy, that is old-age protection, health care and long-term care.

Old-age protection Despite the efforts of the Chinese government to reform the old-age pension over the years, the system is still plagued by a number of problems. Besides the unfavorable demographic trend due to the changing population structure, there are also excessive system fragmentation, inadequate scheme coverage, insufficient funding, limited investment choices and so forth (Pozen, 2013). These problems, if unresolved, will greatly hamper the ability of the pension system to provide adequate old-age protection for the future generations of Chinese senior citizens.

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Fragmentation The Chinese Old-Age Pension System consists of four subsystems: the Urban Enterprise Pension Scheme (UEPS), the Urban Residents Pension Scheme, the New Rural Pension Scheme and the Civil Service Scheme. Great variations are found among the four subsystems, or even within the subsystems, in terms of operational rules, administration, benefit amount and portability of pension and so forth. For instance, out of historical reasons, UEPS, the largest of the schemes, is financed and managed locally by different municipal or provincial governments. Because of the differences in level of economic development and cost of living, residents from wealthier places may receive more generous pension benefits than those living in less well-off localities.The differences in jurisdictions also create significant hurdles to pension portability. Although the Central Government has legally specified that the individual can retain the right to accrued pension benefits when moving to another place to work, the lack of centralized record-keeping system, the differences in ground rules, the long vesting period and so forth have made it difficult, if not impossible, to actualize this right in reality. This fragmentation has been worsened and complicated by the hukou system, which may hinder those retirees without local residency from receiving their benefits. The fragmented system also brings issues of inequity. For instance, the great differences in contribution and benefits between the public sector and private sector employees have long been a source of public grievance and outrage. Recently, the Central Government has proposed to equalize the system by asking the civil servants to contribute the same percentage of their salary to the pension fund as their private sector counterparts. The revamping will also try to close the gaps in pension benefits. However, the news has immediately aroused great resistance among the public sector employees to protect their vested interest (Zhou, 2014).

Coverage Though the Central Government had made a lot of efforts to increase the coverage of the Old-Age Pension system, for example by creating various schemes to cover different sections of the population in urban and rural areas, there are still significant gaps. For example, less than 50 percent of adults are covered by the larger mandatory schemes, UEPS and the Civil Service Scheme. The rest are either not covered, or covered only by the two recently established voluntary schemes for rural workers or non-employed urban residents, in which the accumulated savings and benefits will only be modest. Many rural migrant workers in the cities are simply not covered by any pension scheme because of the restriction imposed by the hukou system (Pozen, 2013). In the rural areas, it had been estimated only one-third of older people are provided with pension benefits (Huang, 2012).

Funding Currently the UEPS fund consists of two parts, the “Social Pooling” component that is made up of employer contribution, and is explicitly used to finance current benefits along a defined schedule in the form of Pay-as-You-Go, and the “Individual Account” component that consists of employee’s contribution, to be paid out to the specific employee in monthly payment upon retirement. However, because of historical reasons, there exist the legacy pensions for two groups of retirees: the “Old People,” who retired before the 1997 pension reform and still rely on the scheme, and the “Middle People” who retired after the pension reform and yet could

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not accumulate enough savings for themselves. Most local governments have found it difficult to use Social Pooling component alone to pay current benefits, including the legacy pensions. Therefore they “borrowed” an overwhelming amount of contributions from the “Individual Account” component to fill the gap, creating the problem of “empty accounts” that seriously undermined the trust of the current employees towards the creditability of the pension system. Insufficient funding is another major issue. The pension fund is unable to keep up with the rapid population aging. According to a source closed to the National Social Security Fund (NSSF), the pension reserve accounts for only 2 percent of China’s GDP, which is extremely low in comparison with other countries such as Norway (83%), Japan (25%) and the US (15%) (Huang, 2013). Because of the insufficient fund, the benefit levels have been set at very low levels, especially in the rural areas, where the benefit level can be as low as RMB 55.

Investment In 2000, National Social Security Fund (NSSF) was established by the Central Government to serve as a strategic reserve fund to support future social security expenditures. Theoretically, this “fund of last resort” could be used to support pension schemes in case of financial difficulties. However, the whole Chinese pension system has already been overwhelmed by current problems arising from legacy pensions and the resulting issue of empty accounts, the non-contributory nature of the Civil Service Scheme and the effects of changing population structure in the future. According to some estimates, for example Nie in 2013 and Wei in 2014 (Ren, 2015), there were tremendous funding shortfalls, and huge amount of money had to be injected into the pension funds. Ma and Xiao had even suggested in 2012 that by 2050, the funding shortfall of UEPS would be equivalent to 83 percent of China’s GDP in 2011, which estimated to be RMB 47.16 trillion in 2011 (Reuters, 2012). The NSSF, with total assets under its management estimated at RMB 1.5 trillion by 2015 (NCSSF, 2015), is immediately dwarfed by these astronomical figures. Furthermore, with the exception of NSSF, which was authorized to have a more flexible investment portfolio, including investing in foreign securities, most state pension funds can only be put in bank deposits and government bonds, with an average of 2 percent annual return over the last decade, which is by no means able to match the inflation and salary escalation in China. Under these limited investment options, it was suggested that the retirees might only receive one fourth of the expected individual account pension (Leckie and Xiao, 2014).

Health care The health care system of pre-reform China, a public system which emphasized universal access, had been described as a “star health care performer” (Ramesh et al., 2014) and earned the world’s recognition. During the period 1952 to 1982, China decreased its infant mortality rate significantly, from 200 to 34 per thousand live births, and life expectancy increased from 35 to 68 years, with a total health care expenditure of just 3 percent of GDP (Blumenthal and Hsiao, 2005), which can be considered remarkable achievements. However, ironically China suddenly became a laggard in health care during the 1990s (Ramesh et al., 2014) because of a series of neoliberal reforms in the 1980s. The Chinese health care system changed from a national, centrally planned system to a privatized market-based one (Ma et al., 2008), with drastic downgrades in coverage, accessibility and service quality. There are frequent public complaints concerning “inaccessible health care, expensive health care,” tense doctor-patient relationships and occurrences of violence towards medical professionals, with some of them ending in tragedy, as the 408

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people have no alternative but to express their grievance related to health care services through individual action. The first wave of reforms in the health care sector, from the mid-1980s till the end of 1990s, was triggered by concerns of soaring health care expenditures. Claiming that it faced great economic difficulties and was thus unable to shoulder the mounting health care expenses, the Central Government drastically altered its role in health care by reducing its share in funding, decentralizing the public health system, devolving the financial responsibility to local governments and demanding they support health care services through their own taxation.To make up the loss of funding from the Central Government, the local governments were given authority to involve in revenue-generating activities. Consequently, non-profitable activities such as health education, control of epidemics, maternal and child health were accorded lesser attention (Blumenthal and Hsiao, 2005). At the same time, public hospitals, although still government-owned, were given more autonomy and economic incentives to compensate for the reduction of government subsidy. They were allowed to keep the surpluses earned by sales of services and drugs, and use them for employee bonus and benefits. However there were loopholes in the government’s price control policy, where prices for basic health care were set below the cost to ensure affordability to all, and prices for new drugs, tests and technology were allowed a 15 percent margin to ensure the financial sustainability of the health care services. Consequently, instead of just providing basic services, hospitals and physicians were lured to earn more by prescribing expensive drugs and high-tech diagnostic services. These resulted in skyrocketing increase in health care spending, and made the services unaffordable for the majority (Ramesh et al., 2014). On the other hand, due to economic reforms, state-owned enterprises in the cities were shut down or had massive layoffs, depriving the original employees of their health care protection. Joining the ranks of the unprotected also included those employed in the informal sector as well as the rural migrant workers. In the countryside, the communes were dismantled as a result of agricultural reforms, leaving the Rural Cooperative Medical System without a financial source, and the rural population without protection. The second wave of reforms, roughly from the late 1990s till the late 2000s, was an attempt to fill these gaps. It had been marked by the establishment and expansion of three new health care insurance schemes to cover different populations in urban and rural areas.The Chinese Government also tried to control health care costs, for example by fixing retail prices for essential drugs. Given the effort put in this period, the major achievement seemed to be the large scale reduction of uninsured population from 70 to 5 percent between 2003 and 2011 (NBSC, 2012). However, the accessibility of health care service of general population had not been improved. Patients’ out-of-pocket payments had been on the rise, and the percentage of households suffered from catastrophic health expenses had not been reduced, barring those in need but without money from the services (Zhang and Navarro, 2014). Inequalities in access were also widening, with rural residents, children, older people and low-income families suffering the most (Ma et al., 2008). As for the aspect of cost control, there was still continuous rapid growth of health care expenditure (Zhang and Navarro, 2014) because the root cause of the problem, the economic incentives for the providers to prescribe and sell expensive and unnecessary drugs, had been left untouched (Ramesh et al., 2014). The occurrence of severe acute respiratory syndrome (SARS) in 2003 and the subsequent avian influenza also underlined the importance of public health education and prevention and monitoring of infectious disease, which was largely neglected by Chinese health care system after the 1980s reforms because of their unprofitable nature. Furthermore, as early as the 1980s, China had already experienced the epidemiologic transition where chronic diseases such as 409

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heart disease, cancer and stroke replaced infectious diseases as the leading causes of death (Blumenthal and Hsiao, 2005). Since that time, the prevalence of and mortality from these chronic diseases, as well as related risk factors such as smoking, obesity, lack of physical exercise, aging and stress and so forth had increased rapidly. These again highlighted the significance of health promotion, which required more input from the health care sector and the governments, as a way to curtail future health care expenses. Table 24.2 outlines the various risk factors that may affect China in terms of increased mortality and morbidity. Although China has made significant achievements in ensuring clear water supply and proper sanitation, and attained above-average standard in Southeast Asia, it still lags behind the median value of all countries, and possesses room to improve. China also has 45 percent of its population using solid fuels, which is closely linked to the increased mortality from pneumonia, pulmonary disease and lung cancer. Although the figure is lower than the average in Southeast Asia, it is far above the median value of all countries. With the general improvement in living standards, the Chinese figures on raised fasting blood glucose as an indicator of diabetes come closed to the median value of all countries as well as the average in Southeast Asia. Prevalence of raised blood pressure as an indicator of hypertension Table 24.2 Health risk factors in China Risk Factors

China

Median Values of All Countries

South-East Asia Region

Population using improved drinking water resources (%) (2012) Population using improved sanitation (%) (2012) Population using solid fuels (2012) Prevalence of raised fasting blood glucose (≥25 years) (%) (2008) Prevalence of raised blood pressure (≥25 years) (%) (2008) Adults aged ≥20 years who are obese (%) (2008) Alcohol consumption among adults aged ≥15 years (liters of pure alcohol per person per year) (2010) Prevalence of smoking any tobacco product among adults aged ≥15 years (%) (2011)

92%

95%

91%

65%

85%

45%

45%

13%

63%

Male: 9.6% Female: 9.4%

Male: 9.9% Female: 9.5%

Male: 9.9% Female: 9.8%

Male: 29.8% Female: 25.6%

Male: 34.6% Female: 28.3%

Male: 25.4% Female: 24.2%

Male: 4.6% Female: 6.5%

Male: 14.9% Female: 22.1%

Male: 1.7% Female: 3.7%

6.7 liters

6.5 liters

3.5 liters

Male: 47% Female: 2%

Male: 32% Female: 7%

Male: 34% Female: 4%

Source: WHS (2014).

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also surpasses the average in Southeast Asia, and approaches that of the median value of all countries. The percentage of obese adults far exceeds Southeast Asian figures, although it is still a long way from the median value of all countries. It is alarming to see the high amount of alcohol consumption and tobacco smoking among the Chinese, especially the males. These figures indicate the increasing risk of cardiovascular diseases, cancer and other chronic diseases in the Chinese population. In 2005, a research report released by the State Council Development Research Centre (PTDRC, 2005) had acknowledged that the health care reform was fundamentally not successful. This was echoed by the United Nations Human Development Report (2005) which pointed out that the health care reform failed to help those who most needed help, particularly the rural population. In contrast to the significant improvement in life expectancy during 1950 to 1980 when China mainly operated a public health care system, average life expectancy in China from 1980 to 1998, increased by only 2 years, in comparison with Australia, Japan and New Zealand which had increased by 4–6 years during the same period (Ma et al., 2008). It seemed that the neoliberal reforms had not helped China to make further advance in this respect.

Long-term care Under the pressure of rapid population aging and the increase in chronic morbidity and disability among older persons, China is facing a great challenge in long-term care, especially when its health care system is still underdeveloped and full of problems. Traditionally, family care has been the cornerstone of aged care in China. Residential care is mainly reserved for destitute people. However with tremendous changes associated with industrialization, urbanization and the socio-economic reforms starting from 1978, the aged care system also needs to change and adapt to the new circumstances and social trends. Marked by the formation of the China National Committee on Aging in 1999, the aging issues have gained more policy attention. This committee now involves 28 ministerial-level government agencies and co-ordinates policy making, planning and development of aged care nationally. The Twelfth Five-Year Plan (2011–2015) compiled by the Chinese Government for socio-economic development has described the emerging three-tier long-term care system with the slogan “Home based care as the basis, community-based care as the necessary backing, and residential care as the supplementary support.”

Family care Filial piety and family care for older members are long cherished practices in traditional Chinese culture. According to existing Chinese law, children are also obligated to support their old-age parents. However, this assumed care pattern is under siege by various social changes, for example the implementation of the One-Child Policy and birth control measures, reduction of family size, decline of co-living arrangement of older people with their children, emergence of the “4–2–1” family structure and so forth. Originally, female family members were assumed to shoulder the duty to care for their older relatives at home. However, with rapid economic growth and increasing female workforce participation, the availability of these informal carers is greatly reduced. These all imply a serious lack of manpower and support inside the families to care for the older generations in the future. The situation becomes even more serious in the countryside when rural girls go to serve as housemaids (baomu) in the cities. Although it helps to provide labor supply for aged care in urban areas, the older people in rural areas are left at home 411

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with reduced support (Hu, 2012). As the number of older people with disabilities also increases, whose care may be beyond the capacity of their families, more formal care will be needed.

Community-based care In 2008, the Chinese Government had issued the directive to develop community based services. This was echoed by the initiatives of China National Committee on Aging in 2009 and the Twelfth Five-Year Plan in promoting home care. In China, community-based care is delivered through community service centers, homebased community care services, day care centers, residential care facilities and volunteer services. A range of home care services such as homemaking, meal delivery, transportation and escort services, rehabilitation care, and referral services are provided to the older people living at home. There is also the Star Light Project, which develops community-based activity centers for older people since 2001 (Wong and Leung, 2012), and a new experimental approach called Virtual Elder-Care Home that links older people in need with emergency support, personal care and homemaking services over the telephone (Feng et al., 2012). However, the development of community-based service, although with a policy push from the Central Government, is still largely confined to the urban areas. In rural areas, centralized support and care in residential homes sponsored by the local governments is still the norm (Feng et al., 2012).

Residential care Despite the recent rapid growth of private residential homes in urban areas, the institutionalization rate remains low by international standards. It is estimated that China has only 2 percent of its older population (2.4 million) living in these institutions, a rate much lower than that in European countries or even Hong Kong (5–8%) (Hu, 2012). There are also significant mismatches between long-term care needs and service provisions.The expansion of services cannot catch up with the growth of the older population with needs. By the end of 2010, there were 39,904 care institutions with about 3.2 million beds, which greatly fell short of the long-term care needs of 11 million “completely disabled” older people at that time (Zhang, 2011). Older people in China are institutionalized mostly for social reasons such as no income, no child or relative to live with and so forth. For instance, the government-funded residential homes mainly served the poor older people with reference to criteria such as “Three-Nos” or “Five Guarantees.” On the other hand, older people with infectious diseases, mental illness, dementia and functional disabilities are frequently excluded from the residential services (Hu, 2012). A 2011 national survey shows that over half of the current homes do not admit residents with limited self-care ability (Wu, 2011). In another study, it was found that only 17 percent of the institutionalized older people had limitations in activities of daily living (Zhang, 2011). There are also resource, service and admission mismatches (Hu, 2012). While 50 percent of older people are living in the cities, only 18 percent of the residential places are located there. The remaining 80 percent of places situated in rural areas are of smaller scale, with relatively low quality, poor equipment and very lean staff ratio. Large-scale and well-equipped nursing homes can only be found in large cities. Most of the residential homes can only deliver general services and limited specialized care (Zhai and Qiu, 2007). In contrast to the tremendous needs, the nationwide occupancy rate of residential homes stands at 75 percent since the 1990s, reflecting the under-utilization of the existing provision (Hu, 2012). 412

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Starting from 1980s, after the implementation of socialization strategy by the government, there has been more private sector participation in the provision of residential services. More highend fee-paying users can also be found. In 2009, around 78 percent of residents in governmentoperated homes were “Three Nos” targets, while fee-paying residents constituted only 17 percent of total residents. On the other hand, in the collective (semi-governmental units organized by local governments) and private sectors, about 80 percent were fee-paying residents (Wong and Leung, 2012). Recognizing the inadequacy of public resources to provide residential services, the Chinese Government has decided to encourage the private sector development through a series of national policy directives and multiple strategies, including the provision of state-built but privately run facilities, privately operated facilities with government support, and subsidies for construction and operations, tax exemptions, land allocation and leasing, reduced utility rates and so forth. Through these, the government hopes to shift its role from “service provider” to “purchaser” and “regulator” of the services (Feng et al., 2012). With these new developments, the residential services in China are gradually developed into a dual system. One is the public sector mainly serving the poorest older people with social needs. The other is a market-driven private sector, mainly serving those with ability to pay high fees. However, those with disability but not money may be left in-between the two extremes. Furthermore, given the high demand and acute shortage of residential places, the majority of older people in need may need to tolerate the low service quality or shoulder a substantial fee, or even both (Wong and Leung, 2012).

Current and future trends of the welfare state system in China To meet the challenges arising from the increase in life expectancy and the changes in population and family structures, it seems that simply putting forward reforms and policy initiatives in three social policies of old-age protection, health care and long-term care are not sufficient. China also needs to reconsider its population policies, as many of the present and future problems and difficulties encountered in these social policies are closely related to the One-Child Policy, the hukou system and the retirement age.

One-Child Policy The implementation of the One-Child Policy has successfully prevented the occurrence of population explosion in China. However, it also diminishes the size of younger generations, which creates difficulties for the society to shoulder the large expenditure and family caring responsibilities arising from population aging. Strong public opinions have been raised for the relaxation or even the abolition of the One-Child Policy. Starting from 2014, the Chinese government has started to implement the policy of allowing urban couples to have two children if only one of the parents is a single child. However, the responses are not as enthusiastic as originally expected. Demand of complete relaxation of the policy has been proposed by a group of scholars in early 2015 (Denver, 2015).

Hukou system As a population control policy to combat rural-urban migration, the hukou system (Chinese residence registration system) has for a long time imposed strict restrictions on entitlement of local social welfare benefits for people not registered in a particular locality. These restrictions 413

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also add complications to the portability of pension benefits. In 2014, the Chinese Central Government has finally issued a policy to reform the hukou system with different degrees of relaxation for towns, small cities and large cities (Branigan, 2014). However, due to the complexity of the matters, strong local resistance and fiscal limitations, the effect of the new policy on welfare eligibility and pension portability remains to be seen.

Retirement age To increase the size of the working population for sustained economic growth, and to tackle the problem of the insufficient amount of pension funds, there are suggestions to delay the retirement age from 55 for men and 50 for women to 60 for both sexes. Through the raising of retirement age, the pension payments can be delayed till later dates. This helps to reduce the pressure on the system. Employees can also accumulate more money in the pension fund with longer working periods. However, the change will not be easy because of the tremendous interests involved. For instance, it had been reported that the Chinese government would consider the possibility of postponing the retirement age, but finally dropped the idea for fears of social unrest (Ren, 2015).

Old-age pension To tackle the issues of portability, inequity of treatments between public and non-public employees, emptying of individual accounts, mishandling of funds by the local governments, insufficient coverage for rural migrant workers, inadequate funds for future payment and so forth, the Central Government has been urged to centralize the control and administration of the systems, by taking away the power of local governments in managing the funds but at the same time shouldering the liabilities to honor pension payments in the future as a tradeoff. Other suggestions included the elimination of empty accounts and the moving towards pre-fund pension, the establishment of a central database for records and accounts, the standardization and harmonization of variations of different subsystems to enhance the portability among different locations and schemes (Pozen, 2013). It was reported that the Chinese government had agreed in principle to uplift the fund pooling level for state pension assets to the provincial level and ultimately to the national level. The funding of all empty individual accounts, the improvement of portability and the unification of the whole pension system in the second half of the century had also been included in the official agenda (Leckie and Xiao, 2014). It had also been proposed that the civil servants contribute the same percentage of their salary to the pension fund as their private sector counterparts to equalize the treatment of public and non-public employees. However, the news had immediately aroused great resistance among the public sector employees in the form of protests or applications for early retirement to protect their vested interest (Zhou, 2015). As for the insufficiency of funds for future payments, there were proposals to direct more profits of State-Owned Enterprise (SOE) into the National Social Security Fund (NSSF) and to enhance investment returns through expanding the range of investment options, so as to strengthen the reserves for upcoming pension liabilities (Pozen, 2013; Leckie and Xiao, 2014).

Health care In the area of health care, a new wave of reforms had been launched in 2009 (COC, 2009) with strong political and financial backup from the Central Government. According to the new 414

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strategy (Meng and Tang, 2010), the state would play a central role in public health again, instead of continuing the retreating trend in the past. The public health system would be strengthened to guarantee the equitable provision of services. It also aimed at improving the areas neglected in previous reforms, for example disease prevention and monitoring, health promotion and education, maternal and child health and mental health services. Primary health care programs would be accorded higher priority in getting government subsidies. In the aspect of medical care, the new strategy also specified clearly that public, nonprofitmaking institutions should occupy the central stage, while private profitmaking institutions would only serve as supplementary support. The hospitals in the cities would provide support to the rural health care system as part of this multi-tier network. The potential of Chinese traditional medicine would be fully explored in the areas of disease prevention and control, reaction to public health incidents and provision of medical care. To protect the people against financial risks arising from illnesses, the strategy recommended is that three existing health care insurance schemes (UE-MBI, UR-BMI and NCMS) be further developed and unified into a system of basic health care insurance protection and extend to cover outpatient services. The government would provide financial support to the schemes to ensure the adequate protection of all, where commercial health care insurance schemes only play a supplementary role. Other reforms listed in the strategy included the building up of a system to safeguard the supply of essential drugs with reasonable price and quality, as high drug cost was one of the major causes of health care cost escalation in past decades. To safeguard the supply of qualified health care professionals, training policies would be developed with additional incentives to encourage those willing to work in remote areas. Some experts had also recommended the Chinese Central Government to enhance its governance capacity, to monitor local governments’ performance in health care, to strengthen the position of insurers and service users, in order to curb the dominance of the health care providers (Ramesh et al., 2014).

Long-term care The Chinese Government had pledged to strengthen the long-term care services for older people in the Twelfth Five-Year Plan. The target had been set in achieving 30 beds per 1,000 older people. That implied an estimation of an additional 3 million beds within 5 years to tackle the serious shortage of long-term care places in the nation (Wong and Leung, 2012). In view of the scarcity of public resources, the private sector had been encouraged by the government through a series of policy inducements to take up a larger role in filling the service gap (Feng et al., 2012). However, with the emphasis still placed on the residential care and the encouragement of private nursing homes, the development of community-based services may be hampered. For instance, there are no specific planning targets for community based services in the Twelfth Five Year Plan. The Chinese Government has also been advised to guard against the occurrence of such imbalanced system with bias towards institutionalization (Feng et al., 2012) and underdevelopment of non-governmental sector (Wong and Leung, 2012). The proliferation of private nursing homes in recent years has aroused concerns about service quality and overcharging problems of these homes (Feng et al., 2012, Wong and Leung, 2012). There is a definite need to strengthen the regulatory mechanism and upgrade the standards, including the building code, basic standards for social welfare institutions and occupational standards for aged care workers and so forth(Feng et al., 2012). 415

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One estimate had been quoted that China required at least 10 million trained aged care workers, but only a very limited portion was qualified in the field (Wong and Leung, 2012). The lack of professionals will also be a huge challenge in the near future, especially in the rural areas. A substantial number of education and training programs will be needed to developing a qualified long-term care workforce (Feng et al., 2012). It is observed that there are serious service mismatches in the long-term care system in China. The eligibility of public services is mainly based on social factors and means test rather than disabilities, while the entry into private services much depends on affordability. Those in the middle will be left without any services to cater to their needs. Policies need to be formulated to ensure those with care needs are properly cared for (Hu, 2012). With the increase of the older population in China, the long-term care needs and the corresponding expenditures are expected to grow as well. However, because of changes in population structure as well as family structure, accelerated by the adoption of the One-Child Policy, it will be difficult for a single party to shoulder the cost alone. Therefore the Chinese government should plan ahead to tackle the issue of long-term care financing, which could be jointly shared by the state, the individuals and their families, the society and the insurance system. The coverage and benefits should be decided by care needs rather than asset- and means-testing (AMTs).

Conclusion China’s reforms have fascinated the world with their significant achievements in economic sphere. However, the results in the social spheres are not so impressive. Although a series of neoliberal measures have been attempted, there are still a lot of problems remaining to be solved, including those produced by the reform measures themselves. The matter will become even more serious with the increase in life expectancy and the arrival of aging society, which brings great pressure on the social policies of old-age protection, health care and long-term care. Although the Chinese government has already started to make preparations for the trend of population aging, there is still a lot to be done to build up a Chinese welfare state that is capable of fulfilling the tremendous and diverse needs of its aging population.

References ADB, Asian Development Bank (2014), Key Indicators for Asia and the Pacific 2014, ADB: Mandaluyong City, Philippines. Barber, S. L. and Yao, L. (2010), Health Insurance Systems in China, Background Paper, No. 37,WHO: Geneva, Switzerland. Blumenthal, D. and Hsiao,W. (2005), Privatization and Its Discontents – The Evolving Chinese Health Care System, New England Journal of Medicine,Vol. 353, No. 11, pp. 1165–1170. Branigan, T. (2014), China Reforms Hukou System to Improve Migrant Workers’ Rights, Guardian, http:// www.theguardian.com. COC, China.org.cn (2009), China Unveil Health Care Reform Guideline, Xinhua News Agency, http:// www.china.org.cn. Denver, S. (2015), Easing of China’s One Child Policy Has Not Produced a Baby-boom, Washington Post, http://www.theguardian.com. EC, Ecns.cn (2011), Pressure on Care for the Elderly Increases in China, http://www.ecns.cn/in-depth/2011/ 10–17/3057.shtml. Feng, Z.; Liu, C.; Guan, X., and Mor, V. (2012), China’s Rapidly Aging Population Creates Policy Challenges in Shaping a Viable Long-Term Care System, Health Affairs,Vol. 12, pp. 2764–2773.

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Gao, H. (2013), China’s Left Behind, World Policy Journal, World Policy Institute, http://www.worldpolicy.org/ journal/summer2013/chinas-left-behind. Gu, E. X. (2001), Dismantling the Chinese Mini-Welfare State? Marketization and the Politics of Institutional Transformation, 1979–1999, Communist and Post-Communist Studies,Vol. 34, pp. 91–111. Guan, X. (2000), China’s Social Policy, Social Policy & Administration,Vol. 34, No. 1, pp. 115–130. Herd, R.; Hu, H.-W., and Koen,V. (2010), Providing Greater Old-Age Security in China. Economics Department Working Papers No. 750, OECD: Paris. Hu, J. (2012), Old-Age Disability in China: Implications for Long-Term Care Policies in the Coming Decades, http://www.rand.org/pubs/rgs_dissertations/RGSD294. Huang,Y. (2012), Low Income Housing in Chinese Cities: Policies and Practices, China Quarterly,Vol.  212, pp. 941–964. ——— (2013), Population Aging in China: A Mixed Blessing, Diplomat, http://thediplomat.com/2013/11/ population-aging-in-china-a-mixed-blessing. Leckie, Stuart, H. and Xiao, Rita (2014), Pension Reforms in China – A Race Against Time, Enterprise Investor, CFA Institute, http://blogs.cfainstitute.org. Leung, J.C.B. and Nann, R. C. (1995), Authority and Benevolence: Social Welfare in China, Chinese University of Hong Kong. Lu, M. and Feng, M. L. (2008), Reforming the Welfare System in the People’s Republic of China, Asian Development Review,Vol. 25, Nos. 1 and 2, pp. 58–80. Ma, J.; Lu, M., and Quan, H. (2008), From a National, Centrally Planned Health System to a System Based on the Market: Lessons from China, Health Affairs,Vol. 27, No. 4, pp. 937–948. MCA, Ministry of Civil Affairs of China (2015), http://www.mca.gov.cn. Meng, Q. and Tang, S. (2010), Universal Coverage of Health Care in China: Challenges and Opportunities, World Health Report (2010) Background Paper, 7, World Health Organization: Geneva, Switzerland. NBSC, National Bureau of Statistics of China (2011), 2010 Population Census, http://www.stats.gov.cn/ english/Statisticaldata/CensusData. ——— (2012), China Statistical Yearbook 2012, China Statistics Press: Beijing. ——— (2013a), China Statistical Yearbook 2013, China Statistics Press: Beijing. ——— (2013b), China’s Economy Achieved a Stabilized and Accelerated Development in the Year of 2012, Press release, http://www.stats.gov.cn. ——— (2014), China Statistical Yearbook 2014, China Statistics Press: Beijing. NCSSF, National Council of Social Security Fund (2015), http://www.ssf.gov.cn. Philion, S. (1998), Chinese Welfare State Regimes, Journal of Contemporary Asia,Vol. 28, No. 4, pp. 518–536. Pozen, R. C. (2013), Tackling the Chinese Pension System, The Paulson Institute: Chicago, IL. PTDRC, Project Team of the Development Research Centre of the State Council, (2005), An Evaluation and Recommendations on the Reforms of the Health System in China, Development Research Centre of the State Council: Beijing. Ramesh, M.; Wu, X., and He, A. J. (2014), Health Governance and Health Care Reforms in China, Health Policy and Planning,Vol. 6 pp. 663–672. Ren, B. (2015), China Turning Gray over Pension Reform Stress, Caixin Online, http://english.caixin.com. Reuters (2012), China Pension Fund Gap to Top 80 Pct of 2011 GDP by 2050, http://www.reuters.com. Sicular, T. (2013), The Challenge of High Inequality in China, The World Bank: Inequality in Focus,Vol. 2, No. 2, http://www.wordlbank.org/poverty. Solinger, D. J. (2005), Path Dependency Reexamined: Chinese Welfare Policy in the Transition to Unemployment, Comparative Politics,Vol. 38, No. 1, pp. 83–101. UN, Department of Economic and Social Affairs, Population Division (2011), World Population Prospect:The 2010 Revision, United Nations: New York. ——— (2013), World Population Ageing 2013, United Nations: New York. UNDP (1995), Human Development Report 1994, Oxford University Press: Oxford. ——— (2005), Human Development Report 2005, UNDP: New York.

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Wang,Y. P. (2013), China’s Urban Housing Revolution, Seminar Paper, Scottish Centre for China Research, University of Glasgow. Wong,Y. C. and Leung, J.C.B. (2012), Long-Term Care in China, Journal of Gerontological Social Work,Vol.  55, pp. 570–586. WHO (2014), World Health Statistics 2014, WHO: Geneva, Switzerland. Wildau, G. (2015), China Pension Reform Targets Civil Servant Privileges, Financial Times, http://www. ft.com. Wu, Q. (2011), Development of Services for the Older People During the 11th Five Year Plan, https://www. cncaprc.gov.cn/info/13086.html. Xie,Y. and Zhou, X. (2014), Income Inequality in Today’s China, Proceedings of the National Academy of Sciences,Vol. 111, No. 19, pp. 6928–6933. Zhai, X. and Qiu, R. (2007), Perception of Long-Term Care, Autonomy, and Dignity by Residents, Family and Caregivers: The Beijing Experience, Journal of Medicine and Philosophy,Vol. 32, No. 5, pp. 425–445. Zhang, K. (2011), Current Situation of Old-age Disability Among Urban/Rural Chinese Elderly, press release, China Research Centre on Aging, http://www.cncaprc.gov.cn/info/13085.html. Zhang, W. and Navarro, V. (2014), Why Hasn’t China’s High-Profile Health Reform (2003–2012) Delivered? Critical Social Policy,Vol. 34, Issue 2, pp. 175–198. Zhou, T. (2014), Academics Hail State Council’s Plan to Unify Pension Programs, Caixin Online, http:// english.caixin.com. Zhou,Y. (2015), Reform of Pension System Worries Public Sector Workers, Global Times, http://www.global times.cn.

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25 The Hong Kong welfare state system With special reference to new initiatives in social assistance provision Joe C. B. Leung

Since 1997, Hong Kong has become a Special Administrative Region (HKSAR) of China. Facing the challenges of global economic uncertainties, the Hong Kong economy shows resilience and grew by 2.9 percent in 2013. The per capita GDP (PPP) in 2012 was US$50,700, ranking 10th in the world. This is largely attributed to the robust Chinese economy. Ranking top in economic freedom and for the ease of paying taxes in the world, the Hong Kong economy remains competitive. Taken together, the return of Hong Kong to the Chinese sovereignty has confirmed Hong Kong’s position as a commercial hub, a financial center, and an international tourist destination. Financially, the government budget is extremely sound and healthy. On top of the foreign currency reserve assets amounted to US$325.8 billion (September 2014), and accumulated fiscal surpluses in recent years reached HK$745.9 billion (March 2014) (FS, 2014: 7). According to the United Nations Development Programme’s Human Development Index in 2013, Hong Kong is a region of “very high human development,” ranking 15th in the world (UNDP, 2014). According to the Basic Law of the HKSAR, government expenditures have to be in line with economic growth. Under the principle of “big market, small government” and “market-leads and government facilitates,” the role of the government is to create the right conditions for markets to develop. These conditions include maintaining the rule of law, keeping taxes low and tax laws simple, nurturing talent, investing in infrastructure, and helping businesses to tap export markets (FS, 2010). Being a small government, Hong Kong’s recurrent public expenditure in 2013 was only 21.7 percent of the total GDP. Social spending only accounted for 9.6 percent of GDP, representing 3.6 percent in education, 2.8 percent in health, 2.2 percent in welfare and 1 percent housing (FS, 2014: Appendix B). This is extremely low by international standards. The average percentage of social spending among OECD members in 2013 was 21.9 percent (OECD, 2013).Yet social services still accounted for 57.5 percent of the 2013–2014 government recurrent expenditures. Overall, social spending of the Hong Kong government is relatively small, yet the government has the capacity to increase social spending supporting more social welfare programs in the future.

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As a so-called productivist state, Hong Kong’s social policy is a means to facilitate economic growth (Holliday, 2000). According to the government, the individual and the family are considered the major sources of social welfare, and government intervention would erode the traditional values of self-reliance and social obligation (Chan, 1996; Tang and Midgley, 2002; Chui et al., 2010). The government therefore plays a merely facilitative and regulatory role in social welfare (Chan, 1996; Wildings, 1997, 2007; Chan, 1998; Holliday, 2000). According to the government, the economy is the main engine of welfare, and full employment is the government’s single most important welfare objective. Poverty alleviation is to help the disadvantaged to move from welfare to self-reliance through promoting employment (Leung, 2011). As Wildings remarked that social policy development in Hong Kong has, however, not being just “the product of a crude application of a laissez-faire ideology, but rather of the complex interaction of political, social and economic factors” (1997: 245). In 2013, Hong Kong’s population stood at 7.19 million. Despite the low fertility rate (fertility rate in 2013 was at an average of 1.125 children per women), the overall population will continue to grow to 8.47 million in 2041, largely due to migration from Mainland China. With life expectancy at 82.78 years, Hong Kong ranked second in the world.The proportion of population aged 65 and over was 14.2 percent, rising to 30 percent in 2041. The dependency ratio, defined as the number of persons aged under 15 and those aged 65 over per 1,000 persons aged 15–64 is projected to rise from 333 in 2011 to 712 in 2041 (CSD, 2014). To address the contested issue of rising poverty and the lack of adequate social protection, in 2005 the government established an advisory committee, the Commission on Poverty. Specifically, the concerns were focused on the poverty situation in Hong Kong and the challenges of rising income disparity, unemployment of low-skilled workers, intergenerational poverty and elder persons in poverty. To the disappointment of the public, the Commission was dissolved in 2007 after making 53 recommendations to support the underprivileged from different backgrounds. Instead of setting up a specific poverty line, the Commission adopted a set of 24 multi-dimensional poverty indicators for monitoring the overall poverty situation in Hong Kong. Eighteen of these indicators were life cycle–based, covering children and youth, working people and adults as well as elders, while the remaining six were community-based (COP, 2005). In 2012, the government re-instituted the Commission on Poverty. With a membership of key stakeholders, including academics, businesses, pressure groups, politicians and professionals, the Commission has adopted, for the first time in the country’s history a poverty line to indicate the situation in Hong Kong. The poverty line is based on 50 percent of the preintervention median monthly household income (MMHI) according to different household size. For example, for a single person household, the poverty line is the monthly income of HK$3,600 (November 2014: US$1 = HK$7.75); a two-person household, HK$7,700; a three-person household, HK$11,500; and so on. Based on the poverty line, it was found that 1.312 million people (540,600 households), or 19.6 percent of the Hong Kong population lived in poverty in 2012 (1.348 million people, 541,100 households and 20.6% in 2009). After considering policy and program intervention (social security cash allowance = social assistance), the poverty stricken population declined to 1.02 million or 15.2 percent. The population further declined to 800,000 or 12 percent if non-cash government subsidies were included. Special vulnerable groups at high risks of poverty include elder persons, social assistance recipients, single parents, working poor, new arrivals and families with children. The Poverty Report also recognized the need to provide assistance to those families living in marginal poverty – those not receiving social assistance – and to address intergenerational poverty (HKG, 2013). 420

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The residual welfare state regime in Hong Kong Despite being an extremely wealthy city, until now Hong Kong has had no compulsory social insurance programs covering retirement, medical care and unemployment. All along, its social protection system has comprised three major programs, notably the Mandatory Provident Fund (MPF), the Social Security Allowance Scheme (SSA) and the Comprehensive Social Security Assistance (CSSA) Scheme. Serving as an asset-building program, the MPF is a retirement protection program based on individual and employee contribution and savings, as well as investment return. Financed by public funds, CSSA is a means-tested social assistance program targeting those people with income below the defined threshold. SSA is a mix of universal and means-tested programs providing limited financial subsidies to the elder persons and the disabled. As a residual welfare regime, Hong Kong’s social protection system is largely based on means-testing programs and individual asset building.

Mandatory Provident Fund After some hot debates on the setting up of a retirement program in Hong Kong in the 1990s, the government, in 2000 introduced the MPF, which is financed by a contribution of 10 percent of the employee’s wage (split equally between employer and employee) to an individual savings account, managed by a selected private fund trustee. Contribution is restricted to the minimum and maximum levels of income, or HK$7,100 and HK$30,000 per month, respectively. Employees aged between 18 and 65 are required to participate in the program. When a person reaches the age of 65, he or she will receive a lump sum from the fund, as accumulated in his or her savings account. The total amount received will depend on the individual’s contribution record and investment returns over the year (Leung, 2015). Employee contributions to MPF are taxdeductible. As a mandatory savings, privately managed, and fully funded contribution scheme, MPF is a typical asset-building program. Before the implementation of the MPF, only about one-third of the Hong Kong workforce had some form of retirement of protection. By June 2014, 73 percent of the workforce has joined the MPF, 24 percent participated in other retirement programs and the rest are not required to join local programs. Only an estimated of 3 percent of the workforce (mainly those self-employed) have not joined any retirement schemes (MPFSA, 2014). By September 2013, the net value of all MPF schemes amounted to HK$488.12 billion. From 2000 to 2013, the annualized internal rate of return (net of fees and charges) is 4.1 percent, higher than the corresponding inflation rate (1.3%) and the bank deposit interest rate (0.8%) over the same period (ISD, 2013). Overall, major criticisms of MPF include high administrative charges, relatively short contribution period, low investment return, and inadequate level of protection (CC, 2012; CD, 2014). More importantly, as the MPF functions more as an individual savings account, the current cohort of older persons and those who are not economically active, for example housewives and the disabled, cannot benefit from the program. Recent reforms are made to cut down MPF administrative fees and charges, through streamlining administrative procedures, enhancing fees transparency, and increasing market competition (ISD, 2014).

Social Security Allowance (social assistance) Implemented in 1973, the SSA comprises the Old-Age Allowance (OAA) and Disability Allowance (DA).This is non-contributory and provides a monthly flat-rate grant (HK$1,230) to meet 421

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the special needs of the elder persons and the severely disabled. DA and OAA (for those aged over 70) are non-means-tested, while for those aged 65–69 it is subject to an income and asset declaration (self-reporting income and assets without vigorous checking). To the government, the allowances are to provide some financial assistance to families to help relieve the pressure of caring for their older or disabled family members; to reduce the demand for institutional care by encouraging families to care for elder persons and disabled members; and to enable the elder persons and the disabled members to contribute to the family budget (Leung, 2015). Because of the low level of benefits, the allowances have been regarded as “fruit money” – to enable the vulnerable population to have some supplementary support. By August 2014, the number of OAA cases reached 193,734 and DA cases 125,899 (SWD, 2014a). In 2012–2013, OAA and DA expenses amounted to HK$10.6 billion (OAA: HK$7.5 billion; DA: HK$3.1 billion) (SWD, 2013).

Comprehensive Social Security Assistance Scheme Being a means-tested social assistance program fully financed by the government, the CSSA provides a safety net for those who cannot support themselves financially. It is designed to bring their income up to a prescribed level to meet their basic needs (SWD, 2014a). Serving people with incomes below the standard threshold, they include people living in poverty due to old age, disabilities, illness, low earnings, unemployment, and single parenthood. The standard rate of assistance covers expenses for basic needs, such as food, clothing, transport and miscellaneous goods. Supplements are provided to long-term CSSA recipients and single parents, while special grants are also available to meet specific needs, such as rent, water/sewage charges, schooling expenses, dental and medical costs, special diet requirements, replacement of household and durable goods, childcare fees, and burial expenses. The standard rates for an elder person range from HK$2,660 to 4,810 per month, depending on his or her health condition; and the average monthly CSSA payment is HK$4,701 where special grants and supplements are taken into account (SWD, 2014b). The number of CSSA cases increases from 241,673 in 2001 to a height of 298,011 in 2005, and then, declines to 276,710 in 2011, and further to 256,438 in August 2014 (Table 25.1). The total number of recipients soared from 397,468 in 2001 to a height of 542,017 in 2004, and then declined to 443,322 in 2011. CSSA expenditure increases from HK$14.4 billion (7.4% of the total recurrent government expenditure) in 2001 to HK$19.5 billion (8% of the total recurrent government expenditure) in 2011 (CSD, 2012).

Table 25.1 Profile of CSSA cases in 2001, 2005, 2011 and 2014 (%)

Old age Disability Ill health Single parent Low earnings Unemployment Others Total No. of Cases

2001

2005

2011

2014 (August)

57 6 8 12 4 12 2 241,673

51 6 8 13 6 14 2 295,333

56 7 9 12 5 10 3 276,710

58 7 10 12 3 8 2 256,438

Sources: CSD (2012); SWD (2014a).

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In terms of the recipient profile, elder recipients have been the major beneficiary group, representing almost 60 percent of the total caseload. Facing a rapid aging society in which retirement protection is largely inadequate, it is inevitable that a significant proportion of the older people has to rely on social assistance for support. Despite the number of elder CSSA recipients that had increased from 159,954 in 2001 to 187,682 in 2005, the figure stabilized at 187,099 in 2011. To the concern of the government, the proportion of able-bodied recipients (single parent, low earnings, and unemployment) remains significant, despite the booming economy and low unemployment rate. The proportion soared from 27.5 percent in 2001 to 33 percent in 2005 (Hong Kong’s economy was affected by the severe acute respiratory syndrome epidemic in 2003), and then dropped gradually to 26 percent in 2011 and further to 23 percent in August 2014 (Table 25.1). Workfare programs for able-bodied recipients have been introduced, including employment service support, compulsory community work, and income disregard. Overall, the relative decline of the able-bodied recipients is due to the continuous economic growth, aging society and the rigorous implementation of workfare programs (Leung, 2011). According to the government estimates, nearly 80 percent of the older people aged 65 or above are at present receiving assistance or allowance of different types, namely CSSA, OAA, and Old-Age Living Allowance. The percentage of older people aged 70 or above receiving assistance or allowance reaches 87 percent (LCSP, 2013). In contrast to the retirement protection, health care and education services are heavily subsidized by the government. Hong Kong residents are entitled to 12 years of compulsory and free education, together with a heavily subsidized post-secondary education. In health care, 70 percent of outpatient consultations are provided by the private medical practitioners, whereas 90 percent of inpatient services are provided by public hospitals.The total charge for each patient per day is only HK$100, which only covers less than 4 percent of actual average cost of a patient day in a public hospital. In terms of total health expenditure in 2007–2008, household out-ofpocket payments only accounted for 6 percent. Private health care insurance only accounted for 13.8 percent of the overall health expenditure (LCPHS, 2012). Hong Kong does not have a health care insurance scheme, yet Bloomberg (2014) ranked Hong Kong as the most efficient health care system in the world in 2012 (second in 2013), in terms of health care costs as a share of GDP and per capita, as well as life expectancy and improvements from the year before.

New initiatives: mixing means-testing with asset-building Facing rising income inequalities and relative poverty, the government has announced that “Poverty alleviation, care for the elder persons and support for the disadvantaged” is one of the policy priorities for the term of office of the current chief executive (2012–2017) (LCPWS, 2014b). To tackle the intractable problems of poverty, there have been a number of new welfare initiatives being introduced in recent years. These programs employed income and asset tests to determine eligibility. Co-payments, vouchers and savings accounts are new tools to provide choices and incentives. In terms of means test, the eligibility criteria have been flexible, with reference to the Median Monthly Domestic Household Income (MMDHI).

Old-Age Living Allowance (OALA) (2014) Because of the rising concerns over the inadequacy of the MPF in providing social protection to older people and the problem of rising elder poverty, the government introduced an “Old-Age Living Allowance” (OALA) under the SSA Scheme on April 1, 2013, to supplement the living expenses of elder people aged 65 or above who are in need of financial support. The current 423

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monthly OALA payment is HK$2,380. OALA is income and assets tested. Different from CSSA, means-testing of OALA is largely based on self-declaration or self-reporting, with no rigorous checking. The income and asset limits are income per month for a single person, HK$7,090; for a married couple, HK$11,360; the total assets value is HK$201,000 for a single person and HK$304,000 for a married couple. In 2014, a total of 420,000 older people received the allowance. Functioning as a “social pension,” OALA is non-contributory means-tested cash transfer to older people. Different from many welfare states, OALA in Hong Kong is not a benefit catering to those who are not eligible to contributory insurance-based pension. At issue is whether the government would consider expanding the OALA by raising the level of allowance, say to HK$3,000 or 4,000 in the future, as a way to meet the rising public expectation on coping with old-age poverty (SWD, 2014c, 2014d, 2014e).

Low-Income Working Family Allowance (LIWFA) (2014) The Low-Income Working Family Allowance (LIWFA) is built on the following three key principles (LCSP, 2014a): 1 A basic allowance will be granted on a family basis and tied to employment and working hours to encourage self-reliance. More allowance is granted to those who work more. Families with eligible children and young members will receive additional allowance. 2 To ensure that limited public resources would be put on those households most in need, an income test and an asset test will be introduced for LIWFA, but the thresholds would be more generous. 3 The structure of LIWFA would be as simple and easy to understand as possible, with appropriate safeguards against abuse to ensure prudent use of public resources. Specific targets are those families with young children living in poverty, but are not eligible for CSSA. A prerequisite is that at least one of the parents has to engage in full-time (more than 208 hours per month) or part-time employment (144 hours per month). Eligible families have their family income equivalent to or below 50 percent of the MMDHI. By meeting the working hour thresholds, the family can receive a basic allowance of HK$600–1,000 a month. For each child, there is an additional allowance of HK$800 a month. Households with an income exceeding 50 percent of MMDHI, but not higher than 60 percent, would be given half of the basic allowance. Single parent households would have a lower working hour requirement. The financial cost is estimated to be HK$3,126.5 million per year, benefiting 204,000 low-income families (involving over 710,000 persons, including over 180,000 eligible children). By so doing, the overall poverty rate is estimated to be reduced by 2.2 percent (from 15.2% to 13%) and the child poverty rate by 4.6 percent (from 19.9% to 15.3%) (LCSP, 2014b). The program can serve to prevent low-income families from falling into the CSSA net, and at the same time can promote upward mobility of children and young people and can break the vicious cycle of intergenerational poverty. The program is considered as a social investment strategy targeting children in low-income families. With the work requirement, the allowance emphasizes work ethic, avoiding the moral hazard of welfare dependency.

Children Development Fund (CDF) (2008) To tackle intergenerational poverty, the government allocated HK$300 million in 2008 to set up the non-governmental organization (NGO)-operated Children Development Fund 424

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(CDF). CDF seeks to encourage participating children to plan for the future, develop an asset-building habit and accumulate savings and intangible assets (such as positive attitudes, personal resilience and capacities, social networks). Targets are children aged 10–16 from disadvantaged backgrounds (receiving CSSA or family income is less than 75 percent of the MMDHI). Since 2009, over 60 projects have been rolled out serving a total of 7,000 children. Based on the principle of asset-building, CDF is a savings program in which participating children are required to save HK$200 (or less) a month during the 2-year period. With the partnership from private donors, the monthly saving would be matched. By the end of the project period, the government would provide special financial incentive (HK$3,000) for each participant. Meanwhile, each participating child would be assigned a personal mentor who is a volunteer responsible for providing guidance to the child in drawing up and implementing their personal development plans with specific development targets. Development targets can include admissions to universities, improvements in examination results, participation in overseas exchange programs, and employment. These development plans would gear towards capacity enhancement, such as education, vocational training or skill enhancement. In addition, the government has committed HK$15,000 per participating child for the provision of relevant training programs (LCPWS, 2013a). An evaluation study on the effectiveness of the program showed that the average completion rate of action targets in personal development plan was 79 percent. Besides the financial improvement, the personal saving plan can help to develop good saving habits, set life goals and plan for the future, improve academic performance and encourage parental participation (PU, 2012). In the 2014–2015 budget, the government further injected another HK$300 million into the fund, and expected an additional 10,000 children would benefit.

Work Incentive Transport Subsidy Scheme (WITSS) (2011) Due to the insufficient employment opportunities in new towns, many people, including lowincome persons, have to travel long distances and pay costly transportation expenses to work. In 2011, the government introduced the Work Incentive Transport Subsidy Scheme (WITSS) in order to relieve the burden of home-workplace transport costs for low-income families. In addition to being a low-income subsidy, the scheme also serves to encourage recipients to stay in employment. Initially, the scheme required applicants to be employed or self-employed; incur traveling expenses in commuting to and from work; meet the monthly income and asset limits of the household; and work no less than 72 hours per month (full-rate monthly subsidy of HK$600) or work less than 72 hours but at least 36 hours per month (half-rate monthly subsidy of HK$300). The monthly income limit is set at the MMDHI (HK$7,900 for single-person and HK$14,700 for two-person households), and the asset limit is three times the asset limits of the CSSA Scheme. Qualified applicants can claim subsidies for the preceding 6–12 months (LCPM, 2012). Because of the strong criticisms of strict eligibility requirements, and the relatively low pick-up rate of the application, the government introduced the “dual track” application criteria in 2013: an applicant can choose to have the income test assessed individually or together as a household. In addition, transport subsidy is calculated on a pro-rata basis for those who worked less than 72 hours per month (LCPM, 2013). Overall, the program serves more as a low-income working individual or family subsidy. The subsidy is higher than the average transport costs, and there is no need for the applicants to prove actual transportation expenses. 425

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Pilot Scheme on Community Care Service Voucher for the Elder Persons (PSCCSVE) (2013) To implement the vision of “aging in place,” the government launched a 4-year Pilot Scheme on Community Care Service Voucher for the Elder Persons (PSCCSVE) in 2013. Financed by a grant of HK$380 million from the Lotteries Fund, the scheme provides subsidies through a voucher to eligible elder persons for them to choose the community care service they need from Recognized Service Providers (RSPs). RSPs would then receive the government subsidy based on the value of the voucher they received. The use of the voucher, based on the principle of “money-follows-the-user,” would enhance service choices. Implemented in two phases over a period of four years (2013–2017), the first phase covers eight districts. Eligible participants are those who have been assessed by the Standardized Care Need Assessment Mechanism for Elder Services of the Social Welfare Department (SWD) as moderately impaired and are waiting for subsidized community care services and/or residential care service in the Central Waiting List of the Long-Term Care Services. A total of 1,200 vouchers would be issued in the first phase. A total of 62 eligible RSPs, from 29 NGOs and two social enterprises, have been selected and received a total amount of HK$78 million as seed money. They will provide a variety of day care services and home care services. Day care services, similar to existing the subsidized Day Care Centre for the Elder Persons, include personal care services, rehabilitation exercise, nursing care, health education, carer support services, counseling and referral services, meals, social and recreational activities, and transportation services to and from the day care center. Home care services, similar to existing Enhanced Home and Community Care Services, include care management, basic and special nursing care, personal care, rehabilitation exercise, carer support services, day respite service, counseling services, 24-hour emergency support, environmental risk assessment and home modifications, homemaking and meals delivery services, transportation and escort services (LCPWS, 2014a).There are two modes of services: mixed mode includes day care (part-time) and home care services; and single mode includes day care services (part-time) only. Eligible older people can use the service vouchers, valued at HK$6,000 a month, to choose the RSP, the type of service, and the service package that suits their individual needs.The voucher value cannot be used as cash or be carried forward to the following month(s). The voucher value would be adjusted annually based on the Composite Consumer Price Index. Based on co-payment to the voucher value, the level of co-payment borne by the elder participants is to be determined by means and asset tests, with reference to the MMDHI. There are five levels of the monthly co-payment amount (HK$500, 750, 1,000, 1,500 and 2,500). For example, for those with income below 75 percent of the MMDHI, including CSSA recipients, the co-payment amount is HK$500 (government subsidy: HK$5,500). For those with income above 175 percent, the co-payment is HK$2,500 (government subsidy: HK$3,500). Government subsidies to the monthly voucher values range from a minimum of HK$500 to a maximum of HK$5,500. Co-payments from the elder persons are paid to the RSPs on a monthly basis. Participants have to report to the government for any changes in income and asset for re-assessment of their copayment amount (SWD, 2014a). To facilitate the voucher holders when selecting the RSPs, all the related information, such as service packages, the price lists of additional and/or non-essential service, and target elder persons to be serviced, is provided through a website and pamphlets.

Community Care Fund Established in 2011, the Community Care Fund (CCF) serves to provide assistance to people facing economic difficulties, in particular those who fall outside the social safety net, or 426

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those within the safety net but having special circumstances that are not covered. In addition, the CSEE may implement measures on a pilot basis to help the government identify those that can be considered for incorporation into the government’s regular assistance and service programs. Currently, CCF has introduced 27 assistance programs covering medical, education, housing, welfare and home affairs areas for target beneficiary groups, including children, elder persons, persons with disabilities, patients, new arrivals and ethnic minorities. Examples include subsidies for school students for lunch expenses; overseas field trips and travel expenses; academic expenses of university students; medical care of needy patients, the elder persons and the disabled; rent payments for families living in private housing; carers of older people; language courses and language examination fees for ethnic minorities and new arrivals; and schools to organize cross-boundary learning activities (CCF, 2014). Since the operation, four programs have been incorporated into the regular government programs. Altogether the government has injected HK$20 billion into the fund, supplemented by HK$1.82 billion received from private donations.

Incentive scheme to further encourage CSSA recipients of the Integrated Employment Assistance Program for Self-Reliance (IEAPS) (2014) Financed by the government and operated by NGOs, the Integrated Employment Assistance Program for Self-Reliance (IEAPS) is to provide a range of one-stop employment services to assist able-bodied CSSA recipients to overcome work barriers and enhance their employability. These services include ordinary employment assistance services, providing labor market information, job training, arranging job matching, and interviews on employment planning. To provide incentives for the able-bodied CSSA recipients to seek employment incomes, “disregarded earnings” (DE) under the CSSA Scheme refers the practice of allowing the recipients to retain part of the work incomes without making the corresponding deductions from the CSSA payments. Monthly earnings from employment reaching HK$4,200 can be partially disregarded up to a maximum of HK$2,500 per month. In addition, the first month’s income earned by a recipient can be totally disregarded on condition that the recipient has not benefited from this provision during the past two years (SWD, 2014b). As many recipients would cease working after having income reaching the prescribed limits, the CCF, in 2014, rolled out a three-year pilot “incentives Scheme to Further Encourage CSSA Recipients of the IEAPS to Secure Employment.” Administered by the SWD, the Incentive Scheme aims to explore the feasibility and effectiveness of incentive payment as a means to further encourage able-bodied CSSA recipients to secure employment and ultimately to leave the CSSA net. Around 2,000 recipients of IEAPs are randomly selected to participate in the scheme. For participants working not less than 120 hours and earning more than HK$4,200 a month, they will not only benefit from the existing disregarded earnings, but will also be provided with an incentive grant if their accumulative earnings above the prescribed disregarded earnings limit reach the incentive target (i.e. two times the asset limit of the household). By this time, the recipients can leave the CSSA Scheme after receiving the full incentive grant from the CCF (SWD, 2014b).

Food bank In 2009, the government allocated HK$100 million to set up five food banks (seven after 2013), or short-term (4–6 weeks) food assistance service projects, operated by NGOs. The service received another additional funding support of HK$100 million in 2011, and HK$200 million 427

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in 2013. To reduce the cost of food expenditures, the unemployed, low-income earners and families, new arrivals, and street sleepers are benefited. Eligible recipients have to be meanstested on incomes (below the MMDHI) and assets. From 2009 to 2013, over 115,400 needy persons were served (LCPWS, 2013b).

Partnership Fund for the Disadvantaged To encourage the involvement of the business sector in welfare service provision, the government introduced the Partnership Fund for the Disadvantaged. Supported with HK$200 million in 2005 and another HK$200 million in 2010 from the government, the fund served to match the value of donations made by the business partners to support NGOs running welfare projects for the disadvantaged. By 2014, a total of 694 projects operated by 156 NGOs were approved, involving HK$319.6 million from 1,120 business partners. To expand the work of the fund, in 2014, another HK$400 million from the government will be allocated. Evaluation study indicated that the fund has encouraged partnership between NGOs and the business sector, and has shown positive impacts on service quality (LCPWS, 2014d). Besides the aforementioned initiatives, there are other new initiatives in the pipeline. After the implementation of the PSCCSVE, the government is also exploring the possibility to introduce a voucher scheme for elder residential care services. The government has earmarked a total of HK$800 million to meet the expenses for issuing 3,000 vouchers in three phases (2015 to 2018). In a pilot project to provide living allowance for carers of the elder persons from low-income families, eligible families can receive HK$2,000–4,000 a month depending on the number of elder persons receiving care. Eligibility criteria include elder persons assessed to have impairment or those waiting for subsidized long-term care services (assessed by the Standardized Care Needs Assessment Mechanism for Elder Persons Services); the carer must be a member of the family and commit to providing the minimum hours of caregiving (120 hours per month); the carer is capable of caregiving and receives relevant training; and family income is at or below 75 percent of MMDHI (LCPWS, 2014c). Finally, the government population policy revealed the crisis of aging population and imminent shortage in labor supply. The government has been enthusiastic to promote active aging (extending the retirement age and promoting volunteering), social enterprises, and strengthened childcare to encourage greater economic participation of older people, young people and women, particularly new arrival women (HKG, 2012).To show the impact of poverty reduction efforts, the government showed that the size of the poverty-stricken population, after government cash-based subsidies, has been reduced to 972,000 in 2013 (poverty rate, 14.5%), as compared to 1,043,000 (16%) in 2009 and 1,018,000 (15.2%) in 2012.The revised poverty lines in 2013 were HK$3,500 for a single-person household; HK$8,300 for a two-person household; and HK$12,500 for a three-person household. Specifically with the introduction of the OALA, the elder poverty rate has been reduced from 44.9 percent before policy intervention to 30.5 percent afterwards (Lam, 2014: A15).

Conclusion In view of the rapid aging of the Hong Kong society, large financial reserve, continuous substantial fiscal surplus of the government budget in recent years, and the strong criticisms on the weaknesses of the current MPF, there have been resounding demands from liberal politicians and pressure groups to establish a universal social pension system of health care and retirement in Hong Kong. In health protection, the government, for decades, has been examining different 428

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alternatives to make the health care system more sustainable. After extensive public consultation, the government has found that the general public expressed strong reservations about mandatory financing options as solutions to address the long-term sustainability of health care financing. Finally, in 2011, a voluntary government-regulated private health insurance scheme, as an alternative to those who are able and willing to use private health care services, was recommended. The proposed reform is therefore an attempt to adjust the balance of public-private health care sectors, by encouraging those financially capable people to participate in private insurance schemes and seek health care in the private sector. In so doing, pressures on the public health care system may be relieved (LCPHS, 2013). Yet the ability of the proposed scheme to mitigate the health care financing problem is in doubt, as it cannot attract a sizable number of older people and employers currently providing health insurance plans to their employees to participate in the new scheme (Yuen, 2012). In essence, a mandatory public financed health care insurance system is not being considered as feasible for Hong Kong. In pension reform, the chief executive set up the Social Security and Retirement Protection Task Force under the Commission on Poverty in 2013. The task force will actively explore issues related to retirement protection, objectively assess different views on the subject and work towards a consensus in the community on the way forward (LCPWS, 2013c). Professor Nelson Chow of the University of Hong Kong was invited to conduct a consultancy study on the future of retirement protection in Hong Kong. According to the recommendations from Professor Chow, the government should introduce a universal retirement protection, a demo-grant based purely on age. All elder people reaching the age of 65 can receive a monthly pension of HK$3,000. Sources of income can come from the savings from OAA, OALA, and CSSA; an injection of a one-off fund of HK$50 billion from the government; and a payroll old-age tax on employers and employees. The tax rates range from 1 percent each on employers and employees (employees with monthly income below HK$10,000) to 2.5 percent (employees with monthly income above HK$20,000, with a maximum limit at HK$120,000) (HKU, 2014). If the recommendation is acceptable to the Hong Kong government, it will represent an unprecedented approach to Hong Kong social security system, moving away from the traditional residual ideology towards a universal system, based not directly on contribution and means-testing. Not surprisingly, in responding to the demand for implementing a universal pension based on the Consultation Report by Professor Nelson Chow, the government said, Given that retirement protection is a highly complex subject . . . And have far-reaching impact on the fiscal sustainability and socio-economic developments in Hong Kong, members of the Commission on Poverty agreed that it has to be taken forward prudently and that more time is needed to examine the report and discuss relevant issues in depth. (Van Der Kamp, 2014) Meanwhile, to examine the future fiscal challenges and how to cope with rising public expenditure demands due to aging population and declining workforce, the Financial Secretary set up the Working Group on Long-Term Fiscal Planning (2014).The Working Group has illustrated the fiscal crisis faced by advanced economies, such as imbalanced fiscal structures, high debts and high unemployment rates. These economies often on the one hand adopted expansionary policies to boost economic growth and employment. On the other hand, they have reduced fiscal deficits through retrenchment. Such contradictory policies would intensify 429

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social conflicts and unrest, hindering economic growth. The Working Group has warned that the Hong Kong government must maintain “fiscal prudence,” and “living within our means.” It is estimated that social welfare expenditures, as a proportion of the GDP will increase from 2.6 percent (HK$56.9 billion) in 2014–2015 to 3.5–7.4 percent (HK$248.3–523.3 billion) in 2041–2042. In summary, the Hong Kong government has shown commitments to introduce new welfare initiatives.Yet the government ideology emphasizing self-reliance, workfare, individual responsibility and targeting the needy through means-testing remain entrenched. Even though the problem of income inequality and poverty is largely critical, the government has shown no desire to move away from a means-tested welfare regime towards a welfare state system based on universal benefits. The motivation of maintaining the status quo of residual welfare is largely intact.

References Bloomberg (2014), Where Do You Get the Most For Your Health Care Dollar? http://www.bloomberg.com. CC, Consumer Council, Hong Kong (2012), Press Release, October 15, http://www.consumer.org.hk. CCF, Community Care Fund (2014), About the Fund, http://www.communitycarefund.hk. CD, China Daily (2014), MPF Reform: The Importance of Core Funds, http://www.chinadaily.com.cn/hkedi tion/2014–07/03/content_17639008.htm. Chan, C. K. (1998), Welfare Policies and the Construction of Welfare Relations in a Residual Welfare State: The Case of Hong Kong, Social Policy & Administration,Vol. 32, No. 3, pp. 278–291. Chan, R. (1996), Welfare in Newly-Industrialized Society: The Construction of the Welfare State in Hong Kong, Avebury: Aldershot. Chui, E.;Tsang, S., and Mok, J. (2010), After the Handover in 1997, Development and Challenges for Social Welfare and Social Work in Hong Kong, Asia Pacific Journal of Social Work and Development,Vol. 20, No. 1, pp. 52–64. COP, Commission on Poverty (2005), Indicators of Poverty, CoP Paper 26/2, http://www.povertyrelief. gov.hk. CSD, Census and Statistics Department, HKSAR Government (2012), Statistics on CSSA, 2001 to 2011, Hong Kong Monthly Digest of Statistics. ——— (2014), Hong Kong in Figures, HKSAR Census and Statistics Department: Hong Kong, http://www. censtatd.gov.hk. FS, Financial Secretary, HKSAR (2010), 2010–2011 Budget, http://www.budget.gov.hk. ——— (2014), The 2014–15 Budget, Government Logistics Department, HKSAR Government, Hong Kong. HKG, HKSAR Government, (2012), Progress Report 2012, http://www.legco.gov.hk. ——— (2013), 2012 Report on the Poverty Situation of Hong Kong, Government Logistics Department, HKSAR Government, Hong Kong, http://www.povertyrelief.gov.hk. HKU, The University of Hong Kong (2014), Research Report on Future Development of Retirement Protection in Hong Kong, http://www.cpu.gov.hk. Holliday, I. (2000), Productivist Welfare Capitalism: Social Policy in East Asia, Political Studies, Vol.  48, pp. 706–723. ISD, Information Services Department, HKSAR Government (2013), Mandatory Provident Fund, http:// www.gov.hk. ——— (2014), Social Welfare, http://www.gov.hk. Lam, C. (2014), Government Measures to Reduce Poverty in Hong Kong Are Delivering the Goods, South China Morning Post, December 1. LCPHS, Legislative Council Panel on Health Services (2012), Roles of Public Funding and Health Insurance in Financing Health Care Services, LC Paper No. CB(2)1360/11–12(01), http://www. legco.gov.hk.

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——— (2013), Public Funding Support for the Implementation of the Health Protection Scheme, http:// www.legco.gov.hk. LCPM, Legislative Council Panel on Manpower (2012), The Work Incentive Transport Subsidy Scheme, LC Paper No. CB(2)269/12–13(02), http://www.legco.gov.hk. ——— (2013), Work Incentive Transport Subsidy Scheme, LC Paper No. CB(2)491/13–14(08), http:// www.legco.gov.hk. LCPWS, Legislative Council Panel on Welfare Services (2013a), Children Development Fund, LC Paper No. CB(2)937/12–13(04), http://www.legco.gov.hk. ——— (2013b),Additional Funding for Short-Term Food Assistance Service, LC Paper No. CB(2)1129/12– 13(03), http://www.legco.gov.hk. ——— (2013c), Study on Retirement Protection in Hong Kong, LC Paper No. CB(2)417/13–14(03), http://www.legco.gov.hk. ——— (2014a), Pilot Scheme on Community Care Service Voucher for the Elderly, LC Paper No. CB(2)626/13–14(08), http://www.legco.gov.hk. ——— (2014b), 2014 Policy Address: Policy Initiatives of the Labor and Welfare Bureau, CC Paper No. CB(2)704/13–14(01), http://www.legco.gov.hk. ——— (2014c), Pilot Scheme on Living Allowance for Carers of the Elderly Persons from Low-Income Families, LC Paper No. CB(2)799/13–14(04), http://www.legco.gov.hk. ——— (2014d), Proposed Injection of Further Funding into the Partnership Fund for the Disadvantaged, LC Paper No. CB(2)2077/13–14(01), http://www.legco.gov.hk. LCSP, Legislative Council Subcommittee on Poverty (2013), Elderly in Poverty, LC Paper No. CB(2)495/12–13(01), http://www.legco.gov.hk. ——— (2014a), 2014 Policy Address: Initiatives Relating to Poverty Alleviation, LC Paper No. CB(2)768/13–14(01), http://www.legco.gov.hk. ——— (2014b), Low-Income Working Family Allowance, LC Paper No. CB(2)1597/13–14(01), http:// www.legco.gov.hk. Leung, J. (2011), Workfare in Hong Kong, in C. K. Chan and K. L. Ngok (eds.), Workfare in East Asia: Why Hard Working Asians Have Been Pushed to the Labor Market? Routledge: London. ——— (2015), Active Ageing in Hong Kong, in A. Walker and C. Aspalter (eds.), Active Ageing in Asia, Routledge: London. MPFSA, Mandatory Provident Fund Schemes Authority (2014), Employed Population Covered by Retirement Schemes, http://www.mpfa.org.hk. OECD (2013), Government Social Spending,Total Public Social Expenditure as a Percentage of GDP, http://www. oecd-ilibrary.org. PU,The Hong Kong Polytechnic University (2012), Report of Consultancy Study on Child Development Fund Pioneer Projects, http://cdf.gov.hk. SWD, Social Welfare Department (2013), Social Welfare Services in Figures, http://www.swd.gov.hk. ——— (2014a), Statistics and Figures on Social Security, http://www.swd.gov.hk. ——— (2014b), 2014–15 Estimates of Expenditure Under Social Welfare Department, http://www.swd. gov.hk/doc/finance. ——— (2014c), First Phase of the Pilot Scheme on Community Care Service Voucher for the Elderly, http://www.swd.gov.hk. ——— (2014d), Community Care Fund’s Incentive Scheme to Further Encourage CSSA Recipients of the Integrated Employment Assistance Program for Self-Reliance to Secure Employment, http://www. swd.gov.hk. ——— (2014e), Old-Age Allowance, http://www.swd.gov.hk. Tang, K. L. and Midgley, J. (2002), Social Policy After the East Asian Crisis: Forging a Normative Basis for Welfare, Journal of Asian Comparative Development,Vol. 1, No. 2, pp. 301–318. UNDP (2014), Human Development Report 2014, Sustaining Human Progress: Reducing Vulnerabilities and Building Resilience, UNDP: New York. Van Der Kamp, J. (2014), Clumsy Effort Sets Back Pension Reform, South China Morning Post, August 2, p. B1.

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Wildings, P. (1997), Social Policy and Social Development in Hong Kong, Asian Journal of Public Administration,Vol. 19, No. 2, pp. 244–275. ——— (2007), Social Policy, in W. M. Lam, P. Lui, W. Wong, and I. Holliday (eds.), Contemporary Hong Kong Politics, Hong Kong University Press: Hong Kong. Yuen, P. (2012), A Review of the Proposed Regulated Voluntary Health Insurance Scheme for Hong Kong, LC Paper No. CB(2)2041/11-12(01), 21 May, http://www.legco.gov.hk/yr11-12/english/panels/hs/ hs_hps/papers/hs_hps0521cb2-2041-1-e.pdf.

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26 The Taiwanese welfare state system With special reference to its universal health insurance system Yih-Jiunn Lee and Yeun-Wen Ku

The literature on welfare regimes contains a huge bulk of publications, written under EspingAndersen’s giant shadow (1990), with the intention of promoting East Asian welfare studies within a comparative social policy hitherto dominated by the experiences of Western welfare states, to see whether East Asia constitutes a particular category of regime, differing from his other categories of social democratic, conservative corporatist and liberal welfare state. Some detailed case studies opened this development. Ku (1997) located welfare in the context of Taiwanese capitalist development and shows how the capitalist world system, the state, ideology and social forces interweave together to shape the particular regime in Taiwan. Kwon (1999) interprets the institutional characteristics of Korean welfare state in terms of the politics of legitimation. Both authors have revealed particular regime characteristics differing from EspingAndersen’s typology; nevertheless they are both reluctant to conclude that their cases constitute a different regime. However, Lee and Ku (2007) finally examine the developmental characteristics of East Asian welfare states presented by Taiwan, South Korea and Japan. A new set of 15 indicators have been developed for factor and cluster analysis of 20 countries with data from the 1980s and 1990s. The results show a new group formed by Taiwan and South Korea that cannot be included in Esping-Andersen’s three regimes, while Japan switches between the three regime types. Some regime characteristics found particularly in the cases of Taiwan and South Korea are low/ medium social security expenditure, high social investment, larger gender discrimination in salary, medium/high welfare stratification, high non-coverage rate of pension, high individual welfare loading and high family welfare responsibility. In comparison to the three regimes, the East Asian developmental welfare regime shows similarity in welfare stratification with the conservative, while the non-coverage of welfare entitlement is similar to the liberal. Similarity between the developmental welfare regime and the social democracy are rare. This chapter will give readers comprehensive and updated information about the Taiwanese welfare system, with special reference to the National Health Insurance that is regarded as the most important achievement of welfare development in Taiwan since the 1990s, along with Taiwan’s democratization. 433

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Major characteristics of the Taiwanese welfare state system The welfare system in Taiwan is generally divided into three categories, including social insurance, welfare services and social assistance. Social insurance is a system based on contributed insurance premiums as financial sources to grant benefits in such cases as diseases, old-age, disability, death, unemployment and so forth to the insurants or their survivors. Welfare services, on the other hand, aim to enhance national well-being through promoting social activities and improving facilities. Finally, social assistance is aimed to provide help to those who are in hardship with basic livelihood needs, and those beneficiaries must satisfy a certain conditions in terms of income, property or qualification. Social insurance is the most important social welfare system in Taiwan. Since the 1950s, there were three kinds of integrated social insurances based on occupational status. They were the Labour Insurance, the Military Servicemen’s Insurance and the Civil Servants Insurance. In the beginning, Labour Insurance did not cover all workers, only the workers employed by large companies (especially state-owned enterprises), while it was gradually expanded to cover more and more workers from the 1950s to the 1990s. Until 1995, medical benefits in these three insurance systems were moved out and restructured into a new universal health care system, namely the National Health Insurance (NHI). The National Pension Insurance (NPI) and Employment Insurance both were established in the 2000s. Unemployment benefits, provided under Labour Insurance since 1999, and several employment-related benefits were reorganized as the Employment Insurance in 2001. National Pension Insurance was designed for the citizens who were not included in occupational pension benefits in 2008. In the 21st century, social insurance systems face new issues after system expansion. Discrimination and financial pressure in pension are the most important issues of social insurance systems nowadays. Social insurance systems are regulated in either occupational status or risk orientation in Taiwan (see Table 26.1). All Civil Servants Insurance (amended as Government Employee and

Table 26.1 Social insurance systems in Taiwan Risks Target Groups

Pension

Employee

Labour Insurance

Self-employed Government employee School staff

Government Employee and School Staff Insurance

Military personnel

Military Servicemen’s Insurance

Adult not employed

National Pension Insurance

Farmer

Elder Farmers Allowance (Labour Insurance)

—

Dependence

National Pension Insurance

—

434

Occupational Injury

Unemployment

Health

Employment Insurance

National Health Insurance

—

The Taiwanese welfare state system

School Insurance in 1999), Military Servicemen’s Insurance and Labour Insurance are comprehensive insurances which are designed by occupational status. Civil Servants Insurance provided seven benefits including maternity, illness, injury, disability, pension, dependents and funeral. Labour Insurance covers the risks of maternity, injury, medical, disability, old age and death. The National Health Insurance, Employment Insurance and National Pension Insurance cover for one single risk. The protection system for farmers is in transition; some farmers are covered by Labour Insurance and others by Farmers Health Insurance. Some elder farmers may get the entitlement and obtain Elder Farmers Welfare Allowance in the insured of Farmers Health Insurance. Unemployment benefit only provides for ordinary workers in Employment Insurance, while civil servants, military servicemen and the private school staffs are not covered by unemployment benefits. Occupational injury risks are covered by the three occupational comprehensive insurances, including Military Servicemen’s Insurance, Civil Servants Insurance and Labour Insurance.

Labour Insurance (LI) Labour Insurance (LI) is the most important and largest insurance scheme for protecting economical security in Taiwan. It covers 9.71 million insured (BLI, 2013a) as 85.11 percent of the labour force of 11.4 million in 2013. Workers above 15 years and below 65 years should be insured under this program by their employers, or the organizations or institutes to which they belong reckoned as the insured units. The insurance types and benefits of LI are categorized as ordinary insurance and occupational accident insurance. Ordinary insurance includes four different kinds of benefits which are maternity benefit, injury or disability benefit, old-age benefit and death benefit. Occupational accident insurance includes four kinds of benefits which are injury and sickness benefits, medical-care benefits, disability benefits and death benefits. Three pension options, old-age pension benefits, disability pension benefits and survivor pension benefits, are provided for the insured since 2009. The Labour Insurance Act regulating LI as occupational comprehensive insurance was first enacted in 1958. The insured workers were extended in the last half century. In 1958, the following workers were covered in LI: (1) industrial workers employed by public or private factories, mines, salt fields, ranges, pasturage, and forest or tea plantations with more than 10 employees; (2) workers employed by a transportation enterprise; (3) members of an occupational union; and (4) fishermen who belong to the Fishermen’s Association. Government temporary employees were covered by LI since 1965. Workers employed by a company or firm with more than 10 employees were covered since 1968. In 1979, insurance was extended to workers employed by a company, firm, journalistic, cultural, non-profit organization or cooperative enterprise with more than five employees. The companies which employed fewer than five workers are allowed to join the LI voluntarily since 1988. Since 1988, those who had received old-age benefits are allowed to be insured in occupational accident insurance on a voluntary basis when reemployed. The ordinary insurance premium rate is 7.5–13 percent of the insured person’s monthly insurance salary. The prevailing premium rate is 8 percent in 2013. The ordinary insurance premium is paid by the insured, the employer and the government. The sharing proportion is different depending on the kinds of insured categories. Most of the insured will pay 20 percent, their employer 70 percent and the government 10 percent. Non-fixed employed workers, the self-employed pay 60 percent premium individually, while the government burden is 40 percent for them (see Table 26.2). 435

Table 26.2 A brief overview of social insurance in Taiwan (unit: 1,000 people)

Labour Insurance Employed Self-employed Seamen Fishermen Government Employee and School Staff Insurance Government Employee School Staff Military Servicemen’s Insurance Officers, Volunteer Non-commissioned Officers and Soldiers Compulsory Noncommissioned officers and soldiers National Pension Insurance General Insured Low-Income Insured Middle- to Low Income Insured Extremely and Severeky Mentally/ Physically Challenged Insured Medium, Mild Mentally/ Physically Challenged Insured Employment Insurance Employed

Number of Insured people

Premium rate

Prevailing premium rate

9,710

7.5–13%

8%

594

243

3,786

6,224

4.5–9%

3–8%

6.5–12%

1–2%

Premium sharing Insured

Employer

Government

20% 60% 80% 80%

70% 0% 0% 0%

10% 40% 20% 20%

35%

65%

35%

32.5%

35%

65%

0

—

100%

60% 0%

— —

40% 100%

30– 45%

—

55–70%

0%

—

100%

30– 45%

—

55–70%

20%

70%

10%

8.25%

32.5%

8%

7.5%

1%

The Taiwanese welfare state system

The occupational accident insurance premium rate is 0.09–1.02 percent depending on industry and occupation. The occupational accident insurance premium is paid by employers. The self-employed workers pay 60 percent themselves and the government pays 40 percent.The monthly insurance salaries are classified in 20 grades: the highest grade is NT$43,900 with an insurance premium of NT$1,463 per month; the lowest grade is NT$19,049 with an insurance premium of NT$635 per month. The average insured salary is NT$29,396 (BLI, 2013a).

Government Employee and School Staff Insurance (GESSI) As the title show, the program of Government Employee and School Staff Insurance (GESSI) was designed for government employees and school staffs. It covered 597,000 insured in 2012 (DGEI, 2013). The GESSI include five different kinds of benefits, which are old-age benefits, death benefits, permanent disability benefits, dependent’s funeral allowance and parental leave allowance. The pension options were provided in the amended act of 2014; all benefits include old-age benefits and disability benefits are lump-sum benefits in GESSI before 2013. The insurance premium rate is 4.5–9 percent of the monthly insurance salary of the insured in GESSI. The prevailing premium rate is 8.25 percent in 2013. The insured pays 35 percent premium and the employers (including the government) pay 65 percent. The monthly insurance salary ranks in 50 grades: the highest grade is NT$53,075 with an insurance premium of NT$4,379 per month; the lowest grade is NT$10,490 with an insurance premium of NT$865 per month. The average insured salary is NT$35,256 (DGEI, 2013).

Employment Insurance (EI) For a long time the unemployed issue was not a serious one in Taiwan; the consideration of the unemployed benefit has not been necessary for the ruling Kuomintang Party until 2000 (Lin and Chou, 2007). Unemployment benefits were provided since 1999 according to the Labour Insurance Act amended in 1968. The Employment Insurance Act which restructured unemployment benefits and some other employment-related benefits was enacted in 2001. Legal foreign employees above 15 years and below 65 years without receiving a pension, government employees, or employees of a small store are required to join this employment insurance. Employment Insurance (EI) covers 6.22 million insured (BLI, 2013b) as 64 percent of the 9.71 million labour insured by LI, or 54 percent of the labour force of 11.4 million in 2013. The insurance premium rate is 1–2 percent of the monthly salary in EI. The prevailing premium rate is 1 percent in 2013. The grades of monthly insurance salary and premium-sharing are the same in EI and LI. The monthly insurance salary has been divided into 20 grades (BLI, 2013b): the insured pays 20 percent premium, the employers pay 70 percent, and the government 10 percent. EI includes five different kinds of benefits, which are unemployment benefits, the early reemployment incentive, the vocational training living allowance, the parental leave allowance and National Health Insurance premium subsidies for unemployed insured persons and dependents enrolled with the insured person. Unemployment benefit provides basic living support to the insured for certain unemployment period. The unemployed apply unemployment benefits according with the conditions: (1) the insured had accumulated at least 12 months of insured record within the 3 years before the insured separated involuntary; and (2) the insured has registered for a job and has failed to find one, or has failed to be arranged for vocational training in 14 days. The unemployment

437

Yih-Jiunn Lee and Yeun-Wen Ku

benefits are 60 percent of insured monthly salary and paid for up to 6 months. In the event that the applicant is 45 years or older or has a mental or physical impairment, the payment of unemployment benefits may be extended to a maximum of 9 months. The unemployment benefits pay an extra 10 percent of the insured monthly salary as allowance for the dependents of the insured. The extra allowance shall be given for up to two dependents. The early re-employment incentive is paid when the insured have met the criteria of claiming unemployment benefits and have found work before the stipulated period of unemployment benefit claim expires, and have been enrolled in the employment insurance program for at least three months. The vocational training living allowance is paid to the unemployed insured who have accepted the arrangement of the public employment agency to participate in full-time vocational training. The vocational training living allowance and unemployment benefits will replace each other. The payment standards and period in vocational training living allowance and unemployment benefit are the same. The parental leave allowance is paid when the insured have accumulated one year of insurance enrollment at least, and with a child less than 3 years old. Maintaining work ethic and avoiding welfare dependency are strongly emphasized in employment insurance. The aim of employment insurance is to improve workers’ skills and capabilities, and to promote employment. The consideration of the early employment incentive and the period limited to six months explains the concern.We may look at the regulations that the insured get the full six months of unemployment benefits should recalculate their insured record, and the period of unemployment benefits plus early employment incentive is limited to a few months.

National Pension Insurance (NPI) The National Pension Program was implemented to provide the basic economic security for the insured persons or their survivors in 2008. The citizens who are above 25 years of age and under 65 years of age, non-participants in LI, GESSI or Military Servicemen’s Insurance (MSI) should take part in National Pension Insurance (NPI). The 3.78 million insured were covered by NPI (BLI, 2013c). NPI includes four different kinds of benefits, which are old-age pension, disability benefit, funeral benefit and survivor payment. The insurance premium is NT$1,296 per insured month. The insured pays 60 percent premium themselves, and the government pays 40 percent. The government pays all premiums for low-income people and the extremely disabled insured. The government pays 55–70 percent of premium for middle- to low-income people, medium or mild disabled insured (BLI, 2013c).

Military Servicemen’s Insurance (MSI) The Military Servicemen’s Insurance Act of 1950 was the first social insurance act in Taiwan. All military officers, non-commissioned officers, soldiers and cadets are target groups of MSI. Scholars comment that the ruler favored to the military and provided welfare generously would help to sustain the ruling authority (Lin, 1995). MSI includes three different kinds of benefits, the old-age benefit, disability benefit and separation benefit. MSI covers 234,000 insured in 2013. The insurance premium rate of MSI is 3–8 percent of the monthly insured’s salary. The prevailing premium rate is 8 percent in 2013. The insured pays 35 percent of the premium themselves, and the government’s burden is 65 percent. For the army scale would be estimated by statistics of MSI. Information and statistics of MSI are not open to the public.

438

The Taiwanese welfare state system

Pension fund/savings accounts The old-age economic security systems are assembled by social insurances and savings accounts in Taiwan. A collective retirement pension fund and two individual savings account systems are found in Taiwan.The various occupation groups own their respective social insurances and pension fund/savings accounts (Figure 26.1). The government employees including the civil servants, military and public school staffs own their collective retirement pension fund. The private school staff and labour own their personal savings pension accounts separately. Portability is the major characteristic in savings accounts. They are portion portable for the three pension fund/savings accounts in Taiwan.There are three different rules for each.The collective pension fund belonging to government employees has been defined a benefit scheme. Employees may get old-age pension when they are eligible for retirement. But if a person departs from their government employer not yet meeting the retirement requirements, they may get a fraction of the savings from the fund only and cannot take any savings to private school staff savings accounts or labour personal savings accounts. The two individual savings are defined-contribution schemes. The savings is portable in the system itself. The labourer may get a lump-sum old-age allowance (or pension) if meeting the retirement requirement. If a labourer interrupts their work without meeting the retirement requirements, they could not get savings from the system until the retirement requirements are met. The private school staff employee may get a lump-sum old-age allowance (or pension) at the time when they are eligible for retirement. If a person leaves from a private school without meeting the retirement requirements, they may get a fraction savings from the system only. In the Government Employee Pension Fund, the mandatory contribution is 12 percent of double the employee’s base salary for the collective pension fund. The insured pays 35 percent contribution themselves; the employer (as government) pays 65 percent.The mandatory contribution is also 12 percent of double the employee’s base salary for private school staff.The insured pays 35 percent of the contribution themselves, and the employer (including government) pays 65 percent. In the labour savings accounts, an employer pays a contribution of no less than 6 percent of an employee’s monthly wage. A worker may voluntarily contribute up to 6 percent of their monthly wages to their savings account per month (see Table 26.2 and Figure 26.1).

Special focus of the NHI Although medical care had been covered by varied insurance schemes, it was not universally available to all citizens until 1995. In the 1980s Taiwan experienced a series of changes towards democratization, in which the state power was no longer monopolized by the KMT and an opposition party, namely the Democratic Progressive Party (DPP), was founded in 1986 to compete with the KMT on a more equal footing. Although the Economist magazine describes this process as going “from dictatorship to democracy in just 5 years – and without revolution” (Economist, October 10, 1992), this is not so smooth because quite a lot of social movements arose and made their claims on the state through street demonstrations and even riots. As one comments, “there is hardly any peaceful social group except the military, the police and civil servants” (Chang, 1989: 12). In responding to this situation, we saw the development of NHI which was announced in 1987, one year after the founding of the DPP, and so the time of social upheavals was heating up. This policy was finally realized in 1995 and marked as the most significant welfare effort of the Taiwanese state in the post-war era.

439

The Labour 50%–70% replace rate

Military 75%–95% replace rate

Private School Staff Savings Account/ Defined Contribution/ Lump-Sum (Pension)

Civic Servant and Public School Staff 75%–95% replace rate

Private School Staff 30%–40% replace rate

Government Employee and School Staff Insurance Defined Benefits/ Pension (Lump-Sum)

Government Employee Pension Fund (Military Civic Servant and Public School Staff)/ Defined Benefits/ Pension (Lump-Sum)

Military Servicemen's Insurance/ Defined Benefits/ Lump-Sum (Pension)

Note: GESSI did not provide pension allowance before 2013. Source: Examination (Yuan, 2013).

Figure 26.1 Old-age allowance in Taiwan (2013)

Not in Employment

National Pension/ Defined Benefits/ Pension

Labour Insurance/ Defined Benefits/ Pension (Lump-Sum)

Labour Pension Savings Account/ Defined Contribution/ Lump-Sum (Pension)

The Taiwanese welfare state system

An NHI system that works The National Health Insurance Act 1994 is the key statute to understand the NHI system. First of all, it defines the DOH as the department of the central government directly responsible for the policy making and supervision of the NHI, and the Bureau of National Health Insurance (now National Health Insurance Administration), which is also an official agency under the DOH, as an insurer to run the system. This obviously expresses that the NHI is a state-run and centralized system. In order to keep medical expenses in control, a calculation team and three committees are set up under the DOH in charge of monitoring balances between premiums and medical expenses and dealing with possible disagreements and frauds. Under the structure, discretionary power is limited, and there is not much room left to local officials and medical professionals in deciding such items as medicines, examinations, treatments and operations of medical care. Doctors are not allowed to suggest patients’ medicines and treatments other than provided by the NHI. This is indeed a system under strict control of the government. In regards to premium, an earning-related contribution scheme is adopted by the NHI. The insured are divided into six categories according to their incomes and pay varied amounts of premiums to the NHI, although the benefits they receive are all the same.The current contribution rate is 4.91 percent of per month income of each insurant, which is further shared by the government, employers and the insured according to different categories of the insured, as shown in Table 26.3.We see the contribution made by the government particularly for the low income, farmers, fishermen and employees without fixed employers and seamen, as compensation to Table 26.3 Contribution shared by the government, employer and the insured (%) Categories of the Insured Civil Servants

Government

Employer

Insured

Teachers in Private Schools Employees of Public and Private Enterprises or Agencies Employers or the SelfEmployed Employees without Fixed Employers, Seamen

Insured Dependents Insured Dependents Insured Dependents

0 0 35 35 10 10

70 70 35 35 60 60

30 30 30 30 30 30

Insured Dependents Insured Dependents

0 0 40 40

0 0 0 0

100 100 60 60

Category III

Farmers and Fishermen

Insured Dependents

70 70

0 0

30 30

Category IV

Military Servicemen

Insured

100

0

0

Category V

Low Income Households Veterans

Category VI

Others

Insured Dependents Insured Dependents Insured Dependents

100 100 100 70 40 40

0 0 0 0 0 0

0 0 0 30 60 60

Category I

Category II

Source: NHIA (2015).

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Yih-Jiunn Lee and Yeun-Wen Ku

these disadvantaged groups, and for civil servants, dependents of military servicemen and veterans, we see it as a responsibility to be their employer or former employer. Other than these groups, employers remain the most important contributor to the NHI. From this, we may say that the Taiwanese state does not change radically to a Western-style welfare state, in which the entitlement to welfare benefits is likely tied to citizenship. Even more so, if we concern ourselves with that the uninsured under the NHI are divided according to their occupational statuses, implying an inequality in the system. In 2013, the total expenditure for health care was 6.61 percent of GDP in Taiwan, rather economical compared to OECD countries, while the NHI covered 99.6 percent of the total population. This figure is far larger than that before the NHI is realized, when the population covered by at least one kind of social insurance schemes was only 57.48 percent in 1994, one year before NHI. As a universal scheme, the NHI has been making a great step forward to include more people into this system. To meet the increasing needs of medical care along with the expanding NHI, the provider side has also been reorganized in responding to this development. At the end of 2013, there were 26,824 NHI-contracted medical institutions, accounting for 93.46 percent of the total medical care institutions in Taiwan. Insured persons could receive suitable care wherever they chose. While overseas if they required treatment for an emergency illness or injury, they also could qualify for either a partial or full reimbursement of accrued fees (MHW, 2015). Access to medical care is a free-market situation. With a health insurance card, the insured can go to any clinic and hospital they prefer. Moreover, they do not need to be bound to a specific doctor in a distinct area like the general practitioner system in Britain and can change to visit different doctors and hospitals on each visit. In the case of traveling around Taiwan, the insured do not worry about the absence of their health care if they bring the card with them. Also, there is no limit on how many cards the insured can use in a fixed period. The system is designed to promote a maximum market mechanism, in which every doctor and hospital must rely on better service to attract customers. The introduction of a insurance card with a microelectronic instrument to store medical records of patients further enhanced accessibility, so that the NHI can easily trace back the history of health and find the most proper treatment for the insured (MHW, 2015). However, even if the system can promote the most effective access to medical care, whether or not it is the most efficient use of medical resources remains in question. Financial health of NHI is therefore the hot issue along with NHI reforms. In order to make health care sustainable, in 2013 the government implemented second-generation NHI. The visions of the NHI, namely to raise quality, care for the disadvantaged, ensure sustainability and serve as an international benchmark, were formulated with the objectives of guaranteeing universal health care and fair treatment. Reforms included linking financial revenues and expenditures, raising the financial burden of the government, strengthening care for disadvantaged groups, expanding citizen participation, introducing diverse payment mechanisms and releasing medical treatment quality information, bed volume data and financial statements of medical institutions. Inmates of correctional institutions were also added to the NHI system to ensure their right to health (MHW, 2015).

Impacts of the NHI If the impacts of the NHI need to be examined, we have to go back to the situation before the NHI was enforced and to see whether the present is better and improving. This evaluation is going to be done in five aspects: (1) principles of the system working, (2) who are benefited most, (3) risks covered by the NHI, (4) equality in access to health care, and (5) the degrees of people’s satisfaction. 442

The Taiwanese welfare state system

Before the NHI is enforced, social insurance systems in Taiwan were established separately for three major occupational groups, namely military servicemen, civil servants and labourers, to cover the risks of maternity, injury and sickness, medical care, disability, old age, death and funeral allowances, out of all of which only medical care constituted a benefit in kind. A gradual expansion, based on these existing social insurance systems, continued over the post-war era to include more groups related to the three major occupational groups, such as the retired and dependents (Ku, 1995).The principle of the social insurance systems is quite simple and obvious. If somebody held a position in the labour market or had contributed to the state, that person was most likely to get comprehensive care from social insurance. Those unable to find a job had access to few benefits from Taiwanese state welfare, unless they could get back to work as soon as possible.The benefits people received were therefore closely related to their values in the labour market, while the unemployed and the disadvantaged suffered most. The NHI terminates the relationship between benefit and market value, but not all. Theoretically every citizen should be entitled to the NHI, if only the insured can afford the premium, no matter where the premium is from and its nature as wages or something else.This means that the insured do not need to have a full time job in the labour market. Furthermore, some disadvantaged groups can have a ratio of premium contributed by the government for them, particularly the share of the low-income households totally borne by the government (see Table 26.3). De-commodification, which refers to needs satisfaction through welfare provisions rather than markets, is therefore more likely a principle of the NHI than social insurance systems before. The fact is even more so given that we concern ourselves with the aspect about who are benefited most. As shown in the previous section, there was about 57 percent of the population covered by at least one kind of social insurance scheme before the NHI was enforced. This group of the population has indeed rich potential in economic productivity. Along with the introduction of the NHI, this figure was increasing to around 93 percent by 1996. Nearly 7.54 million people were newly included into the NHI, of which children under 14 years and the aged over 65 years account for the largest groups. They were originally excluded from any social insurance scheme because they were too young to participate in the labour market or because they were retired from the labour market due to old age. From this we may say that the NHI benefits the non-productive population the most. Improvement was made with regard to the risks covered by the NHI. The medical care benefit attaching to the existing social insurance systems mostly focused on treatments of inpatients and outpatients; prevention care was limited to the female in pregnancy. This has now been expanding to the aged, the children under 4 years, the female over 30 years, and the male over 40 years. Moreover, residential care is also a benefit of the NHI, which was totally absent in the past. A more comprehensive health service system is establishing to meet three health needs of prevention, treatment and care. Equality in access to health care is improving as well. With the health insurance card system, the insured can access to every contracted medical agency, over 90 percent of the total. In the past, medical agencies were making contracts separately with different social insurance schemes as well as with various services and items. An inequality was created because of this piecemeal and complicated situation. An insurant under the labour insurance, for example, could only access medical agencies which had a contract with this scheme, and they would also find that the medicines and treatments they took were different from those who were under other social insurance schemes. Doctors were required to ask a patient’s status in order to decide which treatment to offer. Inequality was made not only between productive and non-productive population, but also between those who had different kinds of social insurance. The NHI integrates varied medical care benefits in all other social insurance schemes to be a unified system, in 443

Yih-Jiunn Lee and Yeun-Wen Ku

which the treatment every insurant has is equal. In this sense, a greater citizenship nature is attached to the NHI, and therefore reduces the differentiation in gender, class and status. Finally, although it is difficult to assess the service quality of the NHI, the changes of people’s satisfaction of the NHI is probably a proper indicator to explore this issue. According to opinion surveys conducted by various public organizations in different years, the NHI maintains a high degree of satisfaction from the public, usually up to nearly 80 percent, except for the year of 2002 when NHI had to increase the contribution rate.

Current and future trends of the Taiwanese welfare state system The risks of old age, disability, health care, unemployment and occupational accidents are protected by social insurance systems in Taiwan. As social insurance systems cover various risks and cover almost all citizens, Taiwan would be considered as one of the welfare states. We may find several characteristics of the social insurances in Taiwan as follows.

Occupational social insurance systems Social stratification in social insurance All three occupational social insurance schemes are regulated by certain social insurance acts. Their benefits, payments and premiums vary. Social stratification is incorporated into the social insurance schemes. The occupational difference and social stratification was recognized as a significant pension issue by the government in 2012 (PRTF, 2013). The shared premiums paid by the government are complex and show obvious discrimination in both insurance systems and within LI. They are organized by a group of regulations. The government pays 65 percent of premiums for its employees, while it pays 10–80 percent of premium for the labour. The real share of the premium is calculated based on salary and sharing percentage. As mentioned earlier, the civil servants’ insurance salaries were higher than the labourers’, and the government shares a higher percentage for civil servants; the amount of government payment per government employee is more than the amount per labour (Cheng and Cheng, 2005).

Occupational savings fund/accounts systems The savings fund and accounts were set up for occupational status, too. The savings fund and accounts are complex systems with social stratification. The pension fund that was set for the government employee is a scheme of benefits-defined payment. The savings accounts set for the private school staff and the labourers are defined as contribution and lump-sum payment schemes.The difference is significant between the civil servant and the labour in pension replacement rate, especially to sum up the payment of social insurance and pension fund/account for old age.The pension replacement rate is about 70–95 percent for the civil servant but only about 50–70 percent for the labourer in 2012 (PRTF, 2013).

Occupational systems are obstacles for portability The obstacles for portability were formed by occupational insurances and occupational pension funds/accounts. The 9.71 million labourers cannot carry their social insurance records or pension savings to their new entitlement of government employee or private school staff career. Meanwhile the 530,000 government employees continue their social insurance records and savings within the systems for any level of governmental employee, but they cannot carry their 444

The Taiwanese welfare state system Table 26.4 The continuation of social protection in Taiwan New Occupation Categories Former Occupation Categories

Labour Civic Servants Public School Staff Military Private School Staff Not employed

LI LPSA GESSI GEPF GESSI GEPF MSI GEPF GESSI PSSSA NPI

Labour

Civic Servants

Public School Staff

Military

Private School Staff

Not Employment

LI LPSA

GESSI GEPF

GESSI GEPF

MSI GEPF

GESSI PSSSA

NPI

N N

N N Y Y

N N N Y N Y

N N Y N Y N N N

Y

N N N N N N N N Y

Y Y N Y Y N N

N Y Y N N

N N N

N N N N

N

Notes: 1. Y means former occupational insurance or saving can continue to new one, N means it cannot; 2. Abbreviations: GEPF (Government Employee Pension Fund), GESSI (Government Employee and School Staff Insurance), LI (Labour Insurance), LPSA (Labour Pension Savings Account), MSI (Military Servicemen’s Insurance), NPI (National Pension Insurance), PSSSA (Private School Savings Account).

social insurance records or pension savings to the LI and Labour Pension Saving Funds. A private school staff may carry their social insurance records to their new government employee career, but their savings cannot be carried when changing their career elsewhere (see Table 26.4).

The national pension scheme does not provide basic protection for all people Taiwan’s pension system was described as an incomplete pension system by Bonoli and Skinkawa (2005) because it did not have a universal basic pension system. In general, the National Pension Scheme is respected with a basic protection function for all citizens. But the National Pension Scheme is not a public universal basic pension for those not in employment in Taiwan. The executing National Pension Scheme did not combine all social insurances to provide a universal protection and to offer basic protection for the aged to most of the scholars’ expectations (Fu and Lu, 2009). In addition, the payment for the aged is NT$7,600 per month below the poverty line (NT$10,244) in 2013. It means a pensioner may still be poor if pension is their only income. And over 45 percent of the eligible insured did not participate and pay for NPI (Cheng et al., 2009). The National Pension Scheme is still far from serving as a basic protection for all citizens. SOCIAL INSURANCE SYSTEMS IN TRANSITION

There was a dual extreme in the social security system in Taiwan especially before 2000. Government employees obtained a very generous retirement benefits package, with an income replacement rate of 90 percent. On the one hand, the majority of the labourers were not 445

Yih-Jiunn Lee and Yeun-Wen Ku

protected with basic pension, even if the workers covered by labour insurance just got a lumpsum payment without the second protection of a personal savings system, only 20 percent of income replacement rate for the aged income protection (  Jacobs, 1998). Under the developmental pressures of social and economic structural change, democratization and population aging, social insurance systems were required to provide new benefits and more payments for the new social need. The EI Programs, National Pension Scheme, Labour Pension Funds were set, and pensions were paid by LI. However, the financial pressure issues had emerged because the pensioners were unable to contribute full premiums for their pension. In addition, the generous payments for the large sum of governmental employees have not been reduced. Now the expectation and pressure to reform the systems has been aggregated; they are the present and clear financial pressures emerging from various systems. Encouraging reemployment and avoiding dependency are emphasized in employment insurance. Compared to the main welfare states, there is not a fundamental difference in unemployment payments in Taiwan. To encourage reemployment and avoid dependency are distinctive characteristics in EI development. For a reasonable comparison, formations of unemployment insurances in seven selected countries summarized by de Beer and Schils (2009) are referred to in the following discussion. Most of the employed are covered by EI. It makes sense that some workers would be excluded from unemployment payments. EI excluded government employees, school employees, the self-employed, and workers employed by small stores. It is not harsh to require the work (contribution) record for 12 months during 36 months. The 14 waiting days seems to be higher than the most countries (3–7 days). The payment is counted as 60 percent of insured salary and may extend to 80 percent in special cases close to the level of the selected countries. It is harsh in benefit duration in comparing to the selected countries for six months, and may extend to nine months in special cases. The short payment period presents the ideal of avoiding dependence. Besides, the payment of the early reemployment incentive is the most distinctive characteristics in contrast to the selected countries. Parental leave allowance is paid by social insurances. The issue of family friendliness was a concern for the government to provide support for parents caring for young children, in order to balance family and working needs since 2000. The Labour Insurance Act and Government Employee and School Staff Insurance Act were amended to pay Parental Leave Allowance in 2009. Parental Leave Allowance is paid by social insurances as legal regulations in Taiwan.

Some latent issues POLITICAL TENSION AND BENEFITS COMPETITION BETWEEN SYSTEMS

Political mobilization may be a good explanation for the welfare state expansion. The case in Taiwan has been explained in the political mobilization perspective by empirical studies, especially the expansion after 1980 (Tang, 2000; Aspalter, 2002; Ku, 2002). There are two kinds of political confrontations for benefit, between the labour and the capitalist and among various occupational population groups. The complexity of social insurance reform is increased for the multidimensional mixed political confrontations. The occupational insurance systems and the discrimination between systems caused the benefit competitions and aggravated deficit. Pension reform issues finally were concerned and considered by government in 2012 (PRTF, 2013). In addition, there is not a universal old-age pension program as an equal basic living guarantee for all the aged, but the various occupational social insurance and savings systems do reinforce 446

The Taiwanese welfare state system

occupational differential treatment. Such occupational difference would remind people to argue the exclusion and prejudice or discrimination over and over again, instead of enjoying the insured safety and protection. THE SEGREGATED OCCUPATIONAL INSURANCE SYSTEMS IGNORED OCCUPATIONAL MOBILITY

For social insurances that are defined benefits schemes in Taiwan, the insured records will decide the amount of the payment. If a person cannot carry his insured records into the new insurance system when starting a new career, the benefits may be a shortfall payment. In Taiwan, the social insurance and saving funds were set in segregated occupational systems based on the assumption of limited personal career changes. In fact, most workers cannot carry his/her social insurance records or pension fund to his/her new career. The assumption is unreal in a working world of transition to the social facts of modern Taiwan. To face the social reality of career changes in modern Taiwan the reform of the system is a serious and unavoidable issue for the government. The regulations about carrying and translating contribution records between systems should be devised and integrated.

Summary and conclusions Social insurance reform seems urgent and necessary because the previous assumptions supporting the social insurance systems are now confronted with challenges and various social needs. All different social insurances and savings funds should be discussed as a whole and checked with one another when responding to the new situation. But even until present discussions, only three reforming issues were set by the government, namely the shortage of funds, inequality between occupations, and intergenerational unfairness (PRTF, 2013). In the interpretation of the government, the shortage of funds refers to two things: (1) the insurance premium rate is too low to cope with population aging and results in financial imbalance; and (2) the cash flows of the Labour Insurance Fund and the Government Employee Pension Fund had fallen less than the safe flows of 20 years needed in 2011. In the issue of inequality between occupations, the government recognized there are differences in the pension replacement rate between the government employee and the labour. The pension replacement rate is about 70–95 percent for the civil servant and about 50–70 percent for the labour in 2012. The intergenerational unfairness means that under the circumstance of partial funds and partial pay-as-you-go scheme as Taiwan, the young generation would bear for the elder generation too much owing to the population aging problem, and the young generation will be paid little when they become aged. Obviously, all three issues defined by the government may be generalized as a financial (revenue and expenditure) issue in fact. The financial issue is the only issue that government does care about. In the pension reform of 2012, three objects were proposed as sustainable, guaranteed, and generational equity (PRTF, 2013). The sustainable object means the government should make sure cash flows are safe for 30 years. The guaranteed object means the government would take ultimate responsibility for the payment of all social insurances and pension funds. The generational equity object means that the government would reduce the burden of the younger generation. In governmental expectation, the reform will be implemented in five areas (PRTF, 2013): 1 Reforming pension replacement rate, meaning to change and reset reasonable payment standards to reduce the financial burden of systems. 447

Yih-Jiunn Lee and Yeun-Wen Ku

2 3

4 5

Increasing the premium rate, meaning to raise premium rates for collecting more contributions. Amending the payment conditions, meaning to raise the retirement age and reduce basic unit payments (average insured salary) by increasing the years in calculating basic unit payment. Improving fund efficiency, meaning to increase fund income from investment. Ensuring the government’s ultimate responsibility, meaning that government will bear the ultimate payment obligations.

Pension reform is on the way.The amending draft acts were proposed and sent to the parliament by the government in 2013. The Private School Staff Savings Act was amended for pension payment in January 2014. The Labour Insurance was proposed to reduce pension payments through reducing basic unit payments (average insured salary) and by increasing the years in calculating it. The government employee pension fund was proposed to raise the contribution years and the retirement age, and to reduce basic unit payment. Pension reform is a difficult task for most countries and may sometimes lead to political confrontation. However, pension reform is ongoing in Taiwan without too much confrontation from the suggestions proposed by scholars and labour organizations and slightly political mobilization happened (TN, 2013; TT, 2013; CP, 2013). The will of the ruling KMT about pension reform had not been shaken by political mobilization and the various proposals. In addition to financial problems, three issues are inevitably important: discrimination, the insured’s records translation between systems, and the lack of a universal basic pension system. Only financial problems were taken into account as a reforming issue in 2012. The other issues were recognized and set to the agenda. It seems convincing for a multi-pillar pension reforming framework drawn from the World Bank (Holzmann and Hinz, 2005) proposed by Pension Reform Task Force. But the framework does not respond to the core issues of Taiwan and wrongly modifies the multi-pillar pension systems that Holzmann and Hinz (2005) proposed.There is a suspicion of deceit and being vague in the framework. In the reforming framework, the social insurances are seen as statutory public pension and are classified to the second pillar.The various occupational savings are seen as the third pillar. But in fact, LI, Military Servicemen’s Insurance, and GESSI are occupational pension insurances (Chiu, 2004). All occupational insurances and the occupational savings fund should be classified to the third pillar if the framework were to refer to the consideration of Holzmann and Hinz (2005). There is not a public universal pension advocated by Holzmann and Hinz in Taiwan (2005). While according to the reform proposal, discrimination will be slightly reduced, but the difference will stay the same. If the reform succeeds, the combined pension replacement rate of insurance and pension fund is about 55–75 percent for the labour, and about 70–85 percent for the government employee (PRTF, 2013).The reform seems to aim for the middle. Furthermore, the insured records translation issue was excluded completely. Undeniably, oldage pension systems are quite complex in Taiwan. That people rarely change their career is a wrong assumption in contemporary Taiwan. There is a need for people to carry their social insurance records and pension fund to their new career when there is not a so-called lifelong jog in a society in transition. But the issue was completely excluded from the reform proposal. The pension reform in Taiwan was started because of financial pressures and was limited in the financial dimension. Some other inappropriate institutional issues such as discrimination, the insured records translation and the lack of a universal basic pension system issues were not taken into the reform agenda in 2012. Obviously, on the way towards a mature social insurance system, there are still efforts to be offered.

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References Aspalter, C. (2002), Democratization and Welfare State Development in Taiwan, Ashgate: Aldershot. BLI, Bureau of Labour Insurance (2013a), Yearbook of Labour Insurance Statistics, Republic of China, Ministry of Labour: Taipei. ——— (2013b), Yearbook of Employment Insurance Statistics, Republic of China, Ministry of Labour: Taipei. ——— (2013c), Yearbook of National Pension Insurance Statistics, Republic of China, Ministry of Labour:Taipei. Bonoli, G. and Skinkawa, T. (2005), Population Aging and the Logics of Pension Reform in Western Europe, East Asia and North America, in G. Bonoli and T. Skinkawa (eds.), Aging and Pension Reform Around the World: Evidence from Eleven Countries, Edward Elgar: Cheltenham. Chang, M. K. (1989), Social Movements and Political Transformation, Institute for National Policy Research: Taipei (in Chinese). Cheng, C.-H. and Cheng, W.-H. P. (2005), Insured’s Financial Burden and Government’s Subsidies in the Social Insurance of Taiwan, Taiwanese Journal of Social Welfare,Vol. 4, No. 1, pp. 51–93 (in Chinese). Cheng, W.-H. P.; Cheng, C.-H.; Fu, T.-H., and Chen, H.-H. (2009), Supervisory System of Operation and Finance Under National Pension Program in Taiwan, Research Report, Ministry of Interior: Taipei (in Chinese). Chiu, S.-B. (2004), Taiwan: Compulsory Occupational Pensions Still Dominate, paper presented at the International Conference on Pensions in Asia: Incentives, Compliance and Their Role in Retirement, Hitotsubashi University, Tokyo. CP, The China Post (2013), Labour Groups Attack Pension Reform Proposal, http://www.chinapost.com.tw, January 30. de Beer, P. and Schils, T. (2009), The Labour Market Triangle: Employment Protection, Unemployment Compensation and Activation in Europe, Edward Elgar: Cheltenham. DGEI, Department of Government Employees Insurance, Bank of Taiwan (2013), Statistic Data for Government Employee and School Staff Insurance, Republic of China, Bank of Taiwan: Taipei. Esping-Andersen, G. (1990), The Three Worlds of Welfare Capitalism, Polity: Cambridge. Fu, T.-H. and Lu, P.-C. (2009), Population Ageing and Social Policy in Taiwan, in T.-H. Fu and R. Hughes (eds.), Aging in East Asia: Challenges and Policies for the Twenty-First Century, Routledge: London. Holzmann, R. and Hinz, R. (2005), Old-Age Income Support in the 21st Century: An International Perspective on Pension Systems and Reform, World Bank: Washington, DC. Jacobs, D. (1998), Social Welfare Systems in East Asia: A Comparative Analysis Including Private Welfare, Centre for Analysis of Social Exclusion, London School of Economics: London. Ku, Y. W. (1995), The Development of State Welfare in the Asian NICs with Special Reference to Taiwan, Social Policy and Administration,Vol. 29, No. 4, pp. 345–364. ——— (1997), Welfare Capitalism in Taiwan: State, Economy and Social Policy, Macmillan: Basingstoke. ——— (2002), Toward a Taiwanese Welfare State: Demographic Change, Politics, and Social Policy, in C. Aspalter (ed.), Discovering the Welfare State in East Asia, Praeger: Westport, CT. Kwon, H.-J. (1999), The Welfare State in Korea:The Politics of Legitimation, Macmillan: Basingstoke. Lee, Y.-J. and Ku, Y. W. (2007), East Asian Welfare Regimes: Testing the Hypothesis of the Developmental Welfare State, Social Policy & Administration,Vol. 41, No. 2, pp. 197–212. Lin, W.-I. (1995), A Study of Kuomingtang’s Social Welfare Perspective, in W.-I. Lin (ed.), Social Welfare in Taiwan: A Community Perspective, Wunan: Taipei (in Chinese). Lin, W.-I. and Chou, W.-C. G. (2007), Globalization, Regime Transformation, and Social Policy Development in Taiwan, in J. Lee and K.-W. Chan (eds.), The Crisis of Welfare in East Asia, Rowman & Littlefield: New York. MHW, Ministry of Health and Welfare (2015), Taiwan Health and Welfare Report, 2014, Ministry of Health and Welfare: Taipei. NHIA, National Health Insurance Administration (2015), http://www.nhi.gov.tw. PRTF, Pension Reform Task Force, Executive Yuan, Republic of China (2013), http://www.cepd.gov.tw/ pension.

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Tang, K.-L. (2000), Social Welfare Development in East Asia, Palgrave: Hampshire. TN,Taiwan News (2013),Taiwan Labour Day Protest Targets Pension Reform, http://www.taiwannews.com. tw, May 1. TT, Taiwan Today (2013), Taiwan’s Pension Reform Faces an Uphill Battle, http://www.taiwantoday.tw, March 17.

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27 The South Korean welfare state system With special reference to the future of social insurance systems Jinsoo Kim and Christina Hießl

Korea’s welfare policy has gone through a development no other country has experienced before – a statement which applies not only to social welfare. Korea was one of the poorest countries in the 1960s. But as it concentrated on economic development, it escaped from poverty, and that success was only possible by means of economic policies that were different from those of others. Korea strongly promoted the Grow-First policy approach which focused mainly on economic development. In this process, social welfare was largely put aside – and what made this possible was the traditional private welfare system inherited from the past, particularly, the mutual assistance by family members. Furthermore, Korea had to go through World War II as Japan’s colony as well as the Korean War. There was no financial support like the Marshall Plan. In such circumstances, the only way Korea could develop was to continue to promote the competitive edge in price through high-quality and cheap labor and concentrate on an export-based economic system. Such a policy that maintained cheap labor required the government to disregard or neglect workers’ welfare or the nation’s quality of life, which resulted in a worsening gap between the rich and the poor, a large business-oriented economic structure, the suppression of the labor movement and the dictatorship of the government which supported such policies. This distorted system was maintained for a long time. Finally in the 1980s, when the economic development reached a certain level, Korea entered a condition of post-industrialization. Now, once economic development had arrived at a certain stage, the population could no longer accept their situation in which equality had been severely distorted, and started to resist the government. What’s more, the management-labor relationship had been destroyed so much that the labor movement became more violent. The government was finally forced to change its policies to establish basic rights for each individual through democratization. Interestingly, although Korea’s political and economic system has always been hugely dependent upon the US, its social welfare system was and is strongly geared towards the Continental European model rather than that of the UK or the US, and there is little dispute over this peculiarity.

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Recently, socio-economic conditions in Korea have become increasingly complicated. The interest of Korean society in social welfare is stronger than ever before. Particularly, there are calls for complementing the social safety net and expanding social welfare in line with the changes in the social environment. In reality, however, this process has been complex and chaotic because the country had little experience in conducting social welfare policies and has frequently merely expanded the budgets of diverse programs without a comprehensive strategy. As a result, social welfare policies were often swayed by political decisions rather than by an efficient operation of the budgets. There are some key changes in the Korean social and economic environment: income polarization and the bipolarity in the labor market as social bipolarization, the low birthrate and aging population, the dissolution of the traditional family and the weakening link among family members, and the diversification and complexity of income and job concepts due to the complexity of social realities. And all these fundamental issues are occurring at the same time.

Major characteristics of the South Korean welfare state system The development of social welfare in Korea shows a distinguishing morphology. Korea has been reforming its social welfare system due to concerns about the fiscal crisis, which is basically a typical feature of developed countries, and at the same time it has made efforts to expand social welfare, which is typical for the policy strategy of developing countries. Compared to advanced countries, Korea initially allocated very low budgets to social welfare during its economic development.Yet, as mentioned, once its economy had arrived at a certain level, the share of social welfare expenditure, when measured as part of the government’s general budget, has shown an exponential growth.The proportion of social welfare expenditure reached 33.6 percent in 2013, which is more than twice the level of 1970 (13.8%). Expenditures on social welfare had been much smaller than expenditure on the economy under the authoritarian governments (until the 1970s), but the gap between the two became smaller and then the portion of social welfare expenditure finally exceeded that of the expenditure on economic development (see Table 27.1).1 As of 2011, about 10.4 percent of the GDP in Korea was used for social welfare expenditure.2 Needless to say, this is still very low compared to that of advanced countries. By comparison, the US uses about 19.2 percent of its GDP for social welfare expenditure. Denmark, Sweden and Germany spent a comparatively high portion, 30.1, 28.1 and 25.8 percent of GDP each.3 Within the public welfare expenditure in Korea, social insurance takes up a major part, twothirds of public social welfare expenditure, while social assistance and public welfare services

Table 27.1 Changes in the government expenditure on social welfare, 1970–2013 (percent of the general budget of government)4

Economy Social welfare Education National security Others Total

1970

1980

1990

2000

2010

2013

23.3 13.8 22.4 24.4 16.0 100

16.7 18.6 19.8 29.0 15.9 100

20.9 21.6 18.6 19.3 19.6 100

22.4 24.8 16.3 14.6 21.9 100

18.9 31.7 15.8 11.5 22.2 100

16.8 33.6 16.3 11.8 21.6 100

Source: The Bank of Korea, Economic Statistics System (http://ecos.bok.or.kr).

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The South Korean welfare state system Table 27.2 Portion of social insurance in public social welfare expenditure (1990–2013)

1990 1995 1997 1999 2001 2003 2005 2006 2007 2009 2011 2013

Social Assistance

Public Welfare Services

Social Insurance

Total

15.8 11.5 11.1 10.1 15.6 15.7 16.6 16.7 16.2 18.2 18.8 19.4

19.2 17.8 21.3 17.8 13.2 13.1 16.7 19.5 18.9 18.2 18.3 19.1

65.0 70.7 67.5 72.1 71.2 71.2 66.7 63.8 64.9 63.5 62.9 61.5

100 100 100 100 100 100 100 100 100 100 100 100

Sources: Korea Institute for Health and Social Affairs (KIHASA), Koh et al. (2009).

take up the rest (around 30–40% in total). This illustrates the importance of social insurance in the Korean welfare system (see Table 27.2). The social insurance system in Korea began with the introduction of an Industrial Accident Compensation Insurance (IACI) in 1964. Subsequently, National Health Insurance (NHI) (1977), the National Pension (NP) (1988) and Employment Insurance (EI) (1995) were introduced, so that the four major social insurance systems were established.5 Recently Long-Term Care Insurance (LTCI) has been introduced (2008). NHI and NP cover all economically active persons and their family members, whereas IACI and EI cover employees and some employers. The NP was reformed, cutting pension benefits significantly (about a third of the future pension benefit was cut) in 2007, to address severe concerns about the fiscal stability of the NP, which had been raised since the initial introduction of the program. In the same year, the Basic Old-Age Pension (BOP) (which covers about 70% of the population aged 65 and over) was introduced. Later, BOP was replaced by the Basic Pension (BP).6 NHI covers only the cost of illness, and efforts to reduce the amount of user charges have been made gradually (the user charge has been reduced to 37.7 percent in 2005 from 59.3 percent in 1985 (OECD, 2007). As long as the overall welfare expenditure was not large in its scale, the expenditure on social insurance was also not large. However, with the increase of overall welfare expenditure, expenditure on social insurance has increased at a swift speed and on a large scale (see Figure 27.1). This means that social welfare in Korea is greatly influenced by the functions and roles of social insurance.7 Korea has thus shown an exceptional situation unlike what scholars have argued in relation to third world countries. Korea’s situation was in direct opposition to the argument that, compared to the speed of its economic development, that of social welfare development is much faster (Fischer, 1968), and it had little resemblance to what Singer (1968) argued, which is that below a certain level of an economic status social welfare does not advance. Furthermore, according to Cutright (1965) who argued for the relation of factors like energy consumption, urbanization, and the level of education to social welfare, Korea should already have become an advanced country with a high level of social welfare. Aron (1967) stated that those who have a long history of social welfare spend more on budgets for social welfare. But none of this applies 453

Jinsoo Kim and Christina Hießl 90 80

Billions US dollars

70 60 50 40 30 20 10

94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13

19

92

93

19

19

90 19

19

91

0

Public assistance Private welfare service

Public welfare services

Social insurance

Occupational welfare

Figure 27.1 Trend of welfare expenditure by types (1990–2013) Source: KIHASA, Chang et al. (2009).

to Korea where – after the economy arrived at a certain level and the government started to concentrate on the development of social welfare – social welfare expenditure soared compared to that of other countries. In terms of sociopolitical aspects, Korea is closer to the elite theory of Malloy (1979) than to Mesa-Lago (1978), who explained differentiated benefits of social welfare. As such, Korea’s social welfare development does not conform to what scholars have argued in regard to development trends of social welfare in third world countries; rather, it runs counter to these arguments. Such an exceptional social development trend of Korea is attracting interest of both advanced and developing countries alike. Advanced countries focus on the fact that Korea has put an effort in stabilizing the social welfare budgets in advance and has reformed related systems. Despite its late start in social welfare, Korea has already reformed public pension budgets in order not to experience the same budgetary issues that advanced countries have undergone. Also it has converted and stabilized health insurance to a public social insurance system and, in order to cope with the rapidly aging society, it has established the long-term care system for the elder persons as a form of social insurance. Furthermore, social assistance has expanded during the economic crisis (1998) to strengthen the social safety network system. The aspect that developing countries focus on when viewing Korea’s development trends is that Korea has in fact conducted a “Grow First, Distribute Later” policy. Until now, it has usually been argued that growth and welfare are challenges that should be pursued at the same time, and such a concept has been a tremendous burden for developing countries who have to focus on economic growth. Importantly, there was no case of such “Grow First, Distribute Later” in advanced countries, and thus, such an approach constituted a considerable obstacle for decision makers in developing countries. But Korea’s emerging welfare policy may become an important and encouraging model for them. In this regard, it is necessary to recognize that Korea’s global

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status is changing from a model of economic growth to a model that has harmonized growth and distribution. Despite such international interest, Korea’s social welfare is lacking and has many problems to solve. The drastic increase in social welfare for a short time has led to policy revision and improvement in many areas. Also the more intense international competition and globalization require Korea to ensure sufficient preparation. While it is difficult to clearly determine the features of the social welfare system due to the fact that the level of social welfare expenditure in Korea is still very low and changes very rapidly, it can be said to offer a three-layer coverage of social welfare. While the government provides for basic coverage, both the public and the private sector contribute to covering welfare benefits in proportion to incomes, in the form of a mixture between obligations and self-control. And finally, a higher level of coverage is dependent upon self-regulation by private sectors. If this trend continues, it is expected that Korea will create a unique form of a social security system. However, Korea has to overcome the issue of financial instability in the future and continue to perform social welfare functions by ensuring the sustainability of the system. To this end, Korea must focus on resolving the following issues in its social security system. First, it cannot be disputed that in Korea there is a need to pursue a policy of expansion of social welfare due to the current low level of social policy investment. But it is not an advisable policy decision to make to simply raise budgets. In other words, the world is already showing the signs of financial limitations of welfare states in accordance with the welfare state crisis theory, and the respective difficulties are already witnessed in advanced countries’ social security reform. On the other hand, despite the inappropriateness of simply raising the social welfare budgets, it would be all the more problematic to disregard social welfare or neglect it in policy debate. In the end, the goal must be to find a new harmony and balance between growth and distribution as a policy effort. Korea’s social welfare policy has frequently been short-lived and narrowminded rather than pursuing balance and harmony, and confusion has often been caused as the country’s policy announcements were in conflict with policy results, thereby obstructing the establishment of a sustainable system and development infrastructure for the system. Second, Korea will have to make an effort to solve social welfare-dead zones that are created by the rapid expansion of its social welfare system. Since the introduction of industrial accident compensation insurance in 1964, Korea has continued to introduce a series of insurances as described above. The late introduction of such systems results in some parts being lacking in maintaining related systems. What is most lacking is the establishment of an infrastructure for income information, which would be essential for the effective implementation of social welfare. Such a lack makes uncertain the selection of those who are qualified, as stipulated by the law, and such uncertainty results in unsatisfactory means-testing in case of social assistance, and makes it impossible to determine clearly the qualifications, payment and income level of those who receive social insurance benefits. Indeed this issue is due to the inevitability of the short history of the system. Korea has pursued financial stability through the reform of those areas that were prone to cause financial deficits in advance – especially by reducing the pension calculation basis to two-thirds even before the pension payment started on a full scale under the national pension system. However, occupational pensions that should complement this reduction have not been systematized. What’s more, due to the incomplete establishment of medical systems, it is difficult to achieve an agreement between medical service providers and managing and operating subjects with regard to health insurance. Despite the fact that each individual’s payment for health insurance premiums continues to increase, out-of-pocket expenditure does not seem to be decreasing.

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Although industrial accident compensation insurance is the oldest social insurance system in Korea, many aspects of the complicated legal system – for example the scope of the insurance coverage, the level of payment, personal compensation – are yet to be resolved. As for unemployment insurance, even though it played a crucial role during the financial crisis, its coverage was limited only to some workers, and more practical and proactive labor market policies could not be realized. Thus, only some workers were provided with a payment, and even the amounts thereby disbursed seemed to be far from real needs. Finally, the long-term care insurance for the elder persons was recently initiated with much enthusiasm, but only some part of the insurance is functioning due to the lacking service system. Such insufficiency in each system cannot but show the inefficiency in the relationship of each part with other systems and related laws. Some of the most discussed issues are the occurrence of duplicated payment and the occurrence of dead zones. The third issue concerns the geopolitical circumstances of Korea, which includes notably the question of reunification of the two Koreas and China’s rapid emergence as an economic power. Because the reunification can only be possible after social integration, reunification is not merely an exercise of grafting one state system to another region, but rather a challenge to create a totally new system from two different social systems. Thus Korea should prepare for the reunification with a long-term perspective. Particularly, reunification will give rise to a considerable number of tasks that will have to be resolved at the same time, such as human migration, unemployment issues, and income and medical services for the North Koreans. On the other hand, the rapid emergence of China will create considerable ripple effect on the Korean economy, resulting in the movement of labor of an unprecedented scope and an unpredictable dynamic of the rise and fall of numerous businesses. The impact of such changes on Korea will be something that the country has never experienced before, and therefore, preparations for such changes should be made and measures implemented most diligently. More concretely, China’s rapid emergence will definitely result in a considerable range of changes in the political, economic and social sectors of Korea. The measures of adaptation to such changes require considerable sacrifice and cost. Another important change related to social security as a socioeconomic development is the deepening effect of neoliberalism – worsening polarity in income and the polarization of the labor market on the one hand, and the increasing ambiguity of seemingly clear-cut concepts such as that of income and of the working population on the other. The effect of such changes will be shown largely among the low-income class. The first expected change in the visible environment is the migration among the labor force. The free migration of the labor force does not only mean an inflow of high-level labor. In China, capitalconcentrated industries and labor-concentrated industries coexist, and these two kinds of industries tend to be both competitive and mutually complementing at the same time. Against this backdrop, the migration of the labor force will appear more severe than the analogous phenomenon witnessed in the current integration process in EU. With a view to social insurance, laborers who migrate among various countries might either not even be able to fulfill the minimum period for receiving a public pension in any of the countries involved, or if they do, the pension would be very low, despite their long-term economic activities. In Korea there have been continuous discussions on the direction of the development of future social welfare. But, naturally, no definite conclusion has been found. Nevertheless, the basic direction may mean the reconciliation of two vital aims: coping with the increase in the needs of social welfare according to changes in socioeconomic environments and establishing a social security system that does not follow the mistakes – financial failure – of advanced countries. 456

The South Korean welfare state system

Special focus: the future of social insurance systems The above has shown the central role of social security benefits, and more specifically social insurance for the Korean welfare mix. And indeed there are important arguments for focusing on this strategy. After all, in social insurance, the applicant pays their own premium during the subscription period and receives protection from social risks, which means less burden to the government than protection based on state aids. Also even those who are in the lower income class are encouraged to contribute to the budget, so as to alleviate the stigma symptom. Such advantages are well recognized, in Korea just like in other social-insurance based welfare states. Having said that, Korea may be considered an important example of a welfare state development which raises a fundamental question about the original purpose and function of insurancecentered social security. This development is based on three phenomena – the polarization of income, the diversification of income sources, and the increasingly ambiguous boundaries between workers and self-employed people and the waning of boundaries in the labor market itself. All these have added ambiguity and are diminishing the role and functioning of social insurance.This will be exemplified by the remarks on the Korean situation in the following subsections, which will also indicate that the relevance of these problems is by no means confined to one country, but very likely to be relevant for welfare states around the world.

Income bipolarization Korea is not an exception to the income bipolarization trend in the world. The absolute poverty rate in Korea was 3.1 percent in 20138 – a rate which has been decreased since 2009, and reduced significantly from its peak of 6.7 percent in 1999 (see Figure 27.2).The relative poverty rate (defined as the ratio of those whose income is less than 50 percent of the median income) showed relatively low rate in early 2000s, but it had been increasing faster than absolute poverty rate since 12 Relative poverty

Absolute poverty

10

8

6

4

2

19 9

0 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13

0

Figure 27.2 Trend of the poverty rate (1990–2013) Source: KIHASA, KOSIS (http://kosis.kr).

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Jinsoo Kim and Christina Hießl

2003, reaching 10.3 percent in 2009. Although it had decreased to 8.4 percent in 2013, the relative poverty rate is far higher than the absolute poverty rate. Overall, on the poverty issue in Korea, absolute poverty was more serious than relative poverty until the 1980s. However, absolute poverty has been reduced from the late 1980s and relative poverty has become an issue of concern. This trend has continued till today; we can see that the ratio of the low-income group whose income is above the absolute poverty line but less than 50 percent of median income has sharply increased since the 2000s, which bears witness of the continuing trend of the bipolarization of income in Korea. The Gini coefficient of income distribution was 0.28 in Korea in 2008 (see Figure 27.3).The Gini coefficient (income distribution) has been continuously increasing since 1990, except for a few years, but it has been decreasing since 2009. The Gini coefficient (income distribution) had been continuously decreasing until the early 1990s, but it increased incrementally as from the mid-1990s. With the subsequent increase of the relative poverty rate, this Gini coefficient has increased accordingly since the mid-1990s. Although the figure fluctuated during the Asian Financial Crisis of 1997/1998 and is currently decreasing as the reform of social assistance is taking effect,9 the overall trend of this Gini coefficient has been on the rise since the 1990s and expected to continue in the near future. The described initial decrease of the Gini coefficient (income distribution) and the relative poverty rate was connected to an overall increase of the average household income and the size of the middle-income group (those whose income is more than 50 percent and less than 150 percent of median income) in Korea (Sung, 2009). In the meantime however, the Gini coefficient (income) has worsened again as the high-income group and the low-income group have expanded. Income bipolarization has been continuously under way and this is expected to become even more serious in the future, especially in terms of relative poverty.This tells us that Korea may face challenges regarding the functions and roles of social insurance because of income bipolarization. 0.30 0.29 0.28 0.27 0.26 0.25

12

10

20

20

08 20

06 20

04

02

20

00

20

20

98 19

96 19

94

92

90

19

19

19

88 19

86 19

84 19

19

82

0.24

Gini Coefficient

Figure 27.3 Trends of the Gini coefficient of income distribution in Korea (1982–2013) Notes: Korean Statistics conducted the household survey only for households of employees with more than two members in urban areas; the figures from 1982 to 1899 refer to Sung (2009). Source: KOSIS (2010).

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The South Korean welfare state system

Diversification of the income basis The structure of income, which constitutes the basis of social insurance contributions and benefits, was clearly categorized in the past as labor income for employees and business income for the self-employed. However, this has changed dramatically. When we look at the composition of the household income of employees in urban areas, the proportion of their labor income has decreased incrementally since the mid-1980s (from 90.6% in 1982 to 86.2% in 2014), but their capital income (from assets and properties) and other sources has increased (Figure 27.4).10 Therefore, the income sources which are the basis of their social insurance contributions and their eligibility for pension provision, especially their pensionable age, have become controversial, as more people have income sources other than their labor income and therefore may have a considerable income even after their retirement.

Bipolarization of the labor market We must now look at the labor market situation to review the structural reasons for the bipolarization of income. First, the minimum wage was introduced in 1988.11 The proportion of workers who received the minimum wage was 4.3 percent of total employees who fell under the system in 1990. It decreased to about 2 percent and leveled out in the 1990s.The number of those who received the minimum wage was 1.9 percent of all employees in 1995, but it dramatically increased by approximately eight times to 14.6 percent in 2015 (see Table 27.3). In addition, about 10.8 percent of the total employed population received a wage below the minimum wage in 200912 (KLI, 2009: 9), shaping the broad low-income group, together with those who received the minimum wage. This clearly shows the bipolarization of the labor market in Korea. 100%

95%

90%

85%

80%

Business income

Capital income

Transfer income

20 14

20 12

10 20

20 08

06 20

20 04

02 20

20 00

19 98

4

19 96

19 9

0

Labour income

19 92

19 9

19 88

19 86

19 84

19 82

75%

Irregular income

Figure 27.4  Composition of monthly household income of employees in urban areas (1982–2014) Note: The figures until 2008 refer to the old classification, those from 2009 to the new classification. Source: KOSIS (2010).

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Jinsoo Kim and Christina Hießl Table 27.3 Application of minimum wage system (persons) Year

Workers subject to the minimum wage system (A)

Workers who receive the minimum wage (B)

Portion of (B/A)

1990 1995 2000 2002 2004 2006 2008 2009 2010 2011 2012 2013 2014 2015

4,386,041 5,380,697 5,366,758 7,152,499 13,631,000 14,584,000 15,351,000 15,882,000 16,103,000 16,479,000 17,048,000 17,510,000 17,734,000 18,240,000

187,405 103,191 98,130 201,344 1,035,000 1,503,000 2,214,000 2,085,000 2,566,000 2,336,000 2,343,000 2,582,000 2,565,000 2,668,000

4.3% 1.9% 1.8% 2.8% 7.6% 10.3% 13.8% 13.1% 15.9% 14.2% 13.7% 14.7% 14.5% 14.6%

Source: Ministry of Labor (2015).

Figure 27.5 shows the trend of the minimum wage and the minimum living cost. The minimum wage increased a lot between 2001 and 2015 in comparison with the years before 2001. Although arguably the increase in the number of workers receiving the minimum wage can be partly attributed to that, the rapid increase in the minimum wage was due to the fact that the minimum wage in the initial period was simply too low. As is shown in Figure 27.5, the level of the minimum wage in 2000 was slightly more than the minimum living cost for a household of one person, but far lower than that of two persons. At a high rate of increase, it reached the level of the minimum living cost for a household of two persons in 2004, but it is still below the level of the minimum living cost for three persons. Therefore, the increase of the minimum wage in the 2000s should be understood as a normalization of the level of the minimum wage. Although the minimum wage in Korea has shown a constant increase up until present, the rate of the increase has lessened in the late 2000s. After the minimum wage reached the minimum living cost for two persons, the minimum wage has become closer to the minimum living cost for three persons, almost reaching that amount in 2015.

The relationship between economic change and social security provision To look at the role of social insurance in relation to changes of social environment, the minimum unemployment benefit is compared to the minimum living cost and the minimum wage (Figure 27.6). As the minimum unemployment benefit is set as a proportion of the minimum wage, it has been maintained at a level slightly lower than the minimum wage.13 However, as mentioned, the minimum wage in Korea was originally very low and has increased only recently on a large scale. The minimum unemployment benefit has increased accordingly. As a result, the minimum unemployment benefit reached the level of the minimum living cost for two persons in 2007, and the gap between the minimum unemployment benefit and the minimum living cost for three persons is getting smaller. 460

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Figure 27.7 Relationship of the public pension and other social security benefits (1993–2013) Sources: The average of the old-age pension and the full pension from NPS (2013). The minimum living cost from the MHW (from 2000).

Among those who receive an unemployment benefit, about 58 percent receive only the minimum unemployment benefit (90% of the minimum wage).14 That means that the minimum unemployment benefit has an important role in the labor market in Korea, and this trend is expected to continue. Next, when we look at the level of the public pension, the first full pensioners (20 years of contributions) have been awarded their benefit from 2008, which was very low, only about half of the minimum living cost for one person (Figure 27.7). Because the average full pension and the average full pension complemented by the Basic Old-Age Pension (BOP) exceeded the minimum wage for one person in 2009, they had been getting closer to the minimum wage for two persons.The average amount of public pension payments in Korea is very low, that is below the minimum living cost for one person, even when the BOP is included. Based on the current situation, we may expect that, even when the National Pension matures in the future, most pensioners are likely to receive their pension at a level above the minimum living cost for a household of one or two persons and below the minimum unemployment benefit.

Discussion The described trends – income bipolarization and labor market segmentation, as well as the diversification of the income basis for social insurance contributions and benefits – may pose a fundamental threat to the basis of social insurance for the following reasons. In a situation of sustained income polarization, social security may be continuously less capable of fulfilling a function of income protection. For people on high incomes, the role of 462

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the public pension for their later life income will become ever more marginal. People on low incomes in turn may not find social security payments helpful, as these provisions generally mirror their low wages. For them, all the sources of benefits – social assistance, unemployment benefits and minimum pensions – may converge to the level of the minimum wage, leading to a questioning of the distinctive role of each program. In addition, when more people are relying on various income sources – not only on labor income but also freelancing, financial assets and personal property – this poses a challenge in terms of which income sources should be subject to insurance contributions, and how these should be determined. The increasingly ambiguous boundaries between workers and self-employed people and the waning of boundaries in the labor market itself have added ambiguity and also diminished the role and functioning of social insurance. All in all, these developments may lead both the contributors and the recipients of social insurance to become skeptical about the role and value of social insurance. Considering the unique development of the Korean welfare state, the emergence of the described issues cannot in itself constitute the basis for assuming their relevance also for other countries. Nevertheless, the socio-economic changes shown in this study are certainly not confined to Korea. As is well known, the bipolarization of the labor market, the collapse of the middle class and the increase of income inequality are general trends, occurring in almost all countries (OECD, 2008). And although more research on different countries is certainly needed, these are indications that there might be a need for a worldwide collaborative social policy response to the changes in the socio-economic environment, which is threatening the fundamental basis of social insurance.

Current and future trends of the South Korean welfare state system The development of the Korean welfare state system, left as it is, would probably follow the financial crisis of advanced countries. More precisely, the basic direction is to offer the whole nation some minimum security against all social risk by widening the target of social welfare that the government operates. Also the organic combination of welfare and employment aims at the so-called active welfare or activation principle, which advanced countries have promoted as a means of coping with globalization. Active welfare has two forms: employment-friendly welfare and resolution of social exclusion, which are mutually and organically connected.This implies a reorganization of social policies in such a way that welfare and employment are not reduced to a conflicting or exclusive relation. A core concept is the responsibility of the government for “guaranteeing the minimum level of life,” while private sectors and businesses are encouraged to take responsibility for additional security, so that public and private sectors can cooperate and establish a mixed welfare system. This is meant to secure the sustainability of the system. The government thereby avoids a costintensive social benefits inside in the social security system and instead establishes a first-level social security network based on social insurance and a second-level network based on social assistance – the former being a preventive policy measure for poverty, the latter a direct protective means against existing poverty. For additional security, the security system is meant to be supported by employers as well as the personal choice of each individual. Despite broad agreement on these basic issues, social welfare in Korea has various issues that should be resolved. With a view to European welfare states, three causes are being discussed with regard to what is considered a crisis of welfare states (Esping-Andersen, 1990): the marketdistortive effect of welfare states (welfare policies may suffocate markets and depress labor, saving 463

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and investment), long-term effects of population aging, and inefficiency due to government failure. But the most fundamental cause for the emergency of a crisis may be seen in the fact that social welfare has become politically driven and used – a phenomenon which is clearly visible also in Korea these days. While there is no uniform strategy for addressing such issues, one can see similarities in welfare reform efforts among advanced countries. Currently, the welfare ratio to the total budgets in advanced countries, despite all differences, tends to converge within a certain scope – 20 to 30 percent of GDP – in the long term.15 This glance at advanced countries offers an implication for Korea in terms of the direction of future development. While it is necessary to expand the currently too low welfare budgets of Korea, the more important point is to reach an appropriate level in the long term without following the mistakes made by advanced countries. At present, there is a number of ongoing and planned measures for the improvement of Korea’s social welfare system: On the one hand, public pension, health insurance and elder long-term care insurance are directly related to financial deficit factors in social security, which are in fact the main causes for national deficits among advanced countries. Here, it is essential to reform the schemes to avoid budget shortfalls and to clarify the role of the public sector in the future. Against this backdrop, the benefit from the income-related pension system has been greatly reduced, which however does not mean that it is transformed to a flat rate pension system. Korea has yet to determine the upper limit for the income of those who wish to join the program, the minimum terms for receiving a pension, the minimum pension level, and adjustments in disability pension and survivors’ pensions. On the other hand, another important policy challenge is to determine the role of the Basic Pension (BP), which is a social allowance, in the long term. Because many senior people do not receive an appropriate amount of National Pension (NP), BP plays a key role in guaranteeing them an income, but if NP is activated in the future, smooth transition has to be ensured. More problematic is the public pension system for government employees, military officials and private school teachers: these groups have political power and the system has already matured; therefore, reforming these systems is very difficult. Reforms in this area will be all the more significant for pension policies in Korea. National Health Insurance (NHI) is expanding both qualitatively and quantitatively.This sector is struggling with problems that appear more severe than in advanced countries. Most notably, most of the medical service providers are private organizations and pursue profits. Accordingly, they have an interest to maintain a situation of asymmetrical information to maximize their gains from offering health care services. Therefore, to make health insurance in Korea mature requires more than anything else to achieve stability in the payment system. This includes not only the payment scheme for medical service providers, but also the rationality of the resource procurement method and medical delivery system. The most controversial issue in the payment system for medical service providers is the idea to convert it from the fee-for-service to the global budget system. By giving up the fee-for-service principle, Korea could reduce excessive treatments and resolve unnecessary medical supply such as overuse of drugs. But it can be pointed out that a system based on diagnosis-related groups (DRGs) could drastically reduce the quality of medical services in private, profit-based medical institutions as they are dominant in Korea. This evidences the challenge of the introduction of a fee-for-service system while maintaining the quality of medical services. As opposed to the sectors dealt with so far, Industrial Accident Compensation Insurance (IACI) is the area in which late-starting countries can produce the most visible welfare effects 464

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without meeting overwhelming budget constraints. Successful prevention of work-related accidents is not only a sizable welfare gain in itself, but also contributes to stabilizing the budget for security and rehabilitation measures. This evidences the utmost importance of concentrating on the preventive potential of accident insurance. In this respect, it must be stressed that a system that targets only workers is no longer effective. Rather, industrial accident insurance should be applied to all of those who perform economic activities so as to protect against income loss and medical expenses and offer rehabilitation services. Particularly, it is extremely likely that the industrial structure and labor market structure in Korea will experience a drastic change, such as a surge in the share of temporary workers and increasing immigration of foreign workers. Indeed, income bipolarization along with that of the labor market will become worse. Due to such changes, it is necessary to solidify the mechanism of prevention – rehabilitation – security for all those at risk of poverty due to work-related accidents. Unemployment Insurance (UI) in Korea has started to break away from its former passive income security function and encourage the reintroduction to labor market.The importance of UI is, after all, to protect and give another opportunity to those who are temporarily excluded from or left behind the unlimited competition due to industrialization and globalization. In other words, UI should not be merely about providing monetary benefits, but rather comprehensive employment policies from a more proactive viewpoint through the preventive programs for unemployment, employment promotion programs, and job competency development programs. However, the share of monetary benefits in Korea’s unemployment program is about twice larger than the expenditure for proactive labor market policies, which reflects the character of a passive labor market policy, and particularly the performance of the employment stabilization project is still poor. In this regard, it is necessary to change UI to a system that proactively focuses on preventing unemployment and maintaining employment. One peculiar aspect of UI is maternity protection. Generally in advanced countries, maternity protection benefits are paid from health insurance. In Korea, however, they are paid from UI. This causes reverse discrimination, because the preconditions for unemployment insurance benefits exclude temporary workers, part-time workers, day workers and those who have not worked for more than 6 months. Furthermore, women giving birth to a child while unemployed are excluded from protection as well. In the end, maternity protection benefit in unemployment insurance is only paid to those whose employment is stable.To overcome such reverse discrimination, the maternity protection program should be open to the whole nation. Korea’s long-term care provision program for the elder persons is a social insurance system, as in Germany or Japan. The problems pointed out concerning LTCI in Korea concern issues that appear in the initial stage of the introduction of any new system – such as the definition of its scope, regulations related to its operation, and mistakes in estimating the expected effect. Crucial questions are the relation between long-term care and disease, which had caused debate even before its introduction, the narrow scope of beneficiaries, the excess number of service providers, inappropriate supply of human resources and so forth. Particularly, the system will have to tackle the issue of the side effects caused by too many service providers operating in the sector. In the long term, it is necessary to examine the question of the required comprehensiveness of the system in relation to the degree to which family members can take care of the beneficiary. It has already been pointed out that the scope of beneficiaries of social assistance in Korea is too narrowly defined. Particularly, an entitlement of only 3 percent of the total population results in excluding many who are in poverty from social assistance. Such circumstances force those who are in poverty to conduct illegal activities to be recognized as beneficiaries. Also, once 465

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someone becomes a beneficiary, they can receive all benefits; otherwise, they cannot access any benefit. This all-or-nothing system needs to be transformed into a system in which those who need benefits receive them. Furthermore, continuous management and protection programs are necessary for those who experience long-term unemployment, so that they are at risk of poverty. In other words, it is necessary to introduce an unemployment assistance system that works in order to establish a phased security system. Also, if the government cannot take all the responsibility, it should make an effort to connect its projects to voluntary social work programs provided by private actors in order for the programs to complement each other. Another key development issue that Korea has to put forward is the acquisition and adjustment of some basic infrastructure, which has been lacking due to the short period of its operation.The first step would be the establishment of infrastructure on income information, followed by a comprehensive control system and the adjustment of duplication among benefits programs. These measures would enable the supervision and control of subscribers and beneficiaries in social insurance and social assistance. As of 2011, 60 percent of local subscribers in health insurance in Korea reported that they had no income, and 50 percent of those who were liable to pay the national pension did not pay their premium. As for the issue of duplicate benefits, this is almost left outside of policy considerations. If this condition continues, distrust in the system, and more generally in social welfare policies and the government is likely to emerge.

Summary and conclusions Korean welfare policies are based on the premise that establishing and operating social welfare should consider both universality and specialty. Also, current policies bear evidence of an effort to incorporate inclusiveness and rationality while developing social welfare. But the social welfare system pursued by these policies is different from the welfare system inherent in the country’s traditional society. And it has not gone through a lengthy process of trial and mistake as advanced countries have. Therefore, Korea should adopt a clever policy approach that not only solves problems that are imminent at present, but also avoids the mistakes of the advanced countries. In the process, it might be worth trying to establish a link to Korea’s unique traditional social welfare spirit. Korea has to solve various problems that each social welfare system has. Not only do many of the sub-systems that constitute the Korean welfare state not live up to the role they are expected to fulfill, there are also issues about the interplay between these sub-systems, which is frequently far from harmonious. Some of these problems appear self-evident as the system is still immature, while others are due to the incomplete establishment of the basic infrastructure. Yet others are due to the lack of administrative skills, which leads to the absence of a comprehensive control system. At any rate, Korea faces the challenge of ensuring a rational underpinning of its social security system. With a view to traditional features of Korean society, particularly the focus on family ties, there is a considerable likelihood that issues like polarization and segmentation of the labor market, diversification and blurred boundaries between incomes will continue to progress. The fact that these tendencies seem to be advancing faster than in other countries is one reason for concern that the threat for the existence of social insurance as described above is comparatively higher in Korea. Another reason is that the Korean welfare state system, having been introduced at a later state, did not have the possibility to become fully rooted in the society and develop an institutional soundness that would at any rate resist a risk of complete extinction.

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As a result, while facing a threat which is by no means unique only to Korea, this threat might develop both at a faster pace and with greater vehemence than in the case of other countries. Consequently, rather than simply following the development of advanced countries, as Korea has been striving to do until today, the described development actually puts Korea in a position where it is forced to become a pioneer in responding to new challenges, for which it needs to pursue original thought and rational approaches. An effort to this end might also give it a leading role in a broader international sense, because successful approaches to social welfare in Korea will be closely watched from outside and may constitute a role model for the pursuit of social values abroad. The threats for the existence of social insurance implies a challenge of immense magnitude to social security systems as we know them. Finding strategies of dealing with them wisely and progressively may constitute a key element in determining the future direction of human development.

Notes 1 The data originally divides the purposes of the government budget into 10 categories. In this reading, “Economy” includes “Economy Business,” “Social Welfare” includes “Housing and Community Development,” “Health” and “Social Protection,” “Education” includes “Education,” and “National Security” covers “National Defense” and “Public Order and Safety.” The others such as “General Public Administration,” “Environment Protection” and “Entertainment and Religion” are classified as “Other.” 2 This only includes public social welfare expenditure. 3 OECD Social Expenditure Database (2015). 4 The growth of real GDP in Korea has been 5.3 percent on average from 1954 to 1960, 9.5 percent from 1961 to 1970, 9.3 percent from 1971 to 1980, 9.9 percent from 1981 to 1990, 7 percent from 1991 to 2000, 4.4 percent from 2001 to 2010, and 3 percent from 2011 to 2014 (BOK, Economic Statistics System, http://ecos.bok.or.kr). 5 Separate social insurance programs are applied to civil servants, private school teachers and staffs and soldiers. 6 Basic Old-Age Pension (BOP) was replaced by Basic Pension (BP) in 2009. BP offers allowance two times higher than BOP. Also, BP is more favorable to those who work in that it deducts a certain amount (about $480) of the labor income of those who apply for BP. 7 The fact that – within the general expansion of social security as set out in Table 27.1– the expenditure on social assistance has grown considerably faster than the expenditure on social insurance in the last few years is due to an overdue reform of the social assistance system, which will be referred to below. Especially the maturation of the pension system will lead to a situation in which a major share of the elder persons will soon be entitled to a social insurance benefit instead of relying on social assistance. 8 The official poverty line (Minimum Living Cost in Korea) was not published until 2000.Therefore, the absolute poverty rate before 2000 was based on the data of the Korea Institute of Public Finance (Sung, 2009). 9 This is also the reason for the temporary downward trend in the relative poverty rate visible in Figure 27.2. 10 If we do not confine the study to the households of employees in urban areas but include all households, labor income takes up only about 60 percent of the total household income (KOSIS, 2010). The trend is in accordance with the findings for employees, even though there has been temporary fluctuation. 11 It was initially applied to the employees at workplaces with more than 10 employees, then extended to workplaces with more than five employees in 1999, and then extended to all workplaces, including those with less than four employees. 12 Half of those who receive less than the minimum wage work at workplaces with less than 30 employees. This illustrates the bipolarization among small-sized companies and large companies (KLI, 2009). 13 The minimum unemployment benefit was set at 70 percent of the minimum wage until 1999 and has been set at 90 percent of the minimum wage since 2000.

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14 Calculated by the authors based on the statistics provided by the KEIS (Korea Employment Information Service) (http://www.keis.or.kr). 15 Kim (2006).

References Aron, R. (1967), Industrial Society:Three Essays on Ideology and Development,Weidenfeld & Nicolson: London. Chang Young-Shik (2009), Trend of Health and Welfare in Korea: 2009 (한국의보건복지동향: 2009, in Korean), Korea Institute for Health and Social Affairs: Seoul. Cutright, P. (1965), Political Structure, Economic Development, and National Social Security Programs, American Journal of Sociology,Vol. 70, No 5, pp. 537–550. Esping-Andersen, G. (1990), The Three Worlds of Welfare Capitalism, Polity: Cambridge. Fischer, W. (1968), Wirtschafts- und Sozialgeschichtliche Probleme der Frühen Industrialisierung, Colloquium Verlag: Berlin Koh Kyoung-Hwan (2009), Social Welfare Expenditure in Korea and Old-Age Income Security System in OECD Countries in 2007 (2007년도한국의사회복지지출추계와 OECD 국가의노후소득보 장체계, in Korean). Seoul (서울): Ministry of Health and Welfare and Korea Institute for Health and Social Affairs: Seoul. KEIS, Korea Employment Information Service (한국고용정보원) (2015), from http://www.keis.or.kr. Kim, J. (2006), Recent Social Change and Social Policy in Korea, Asian Journal of Social Policy,Vol. 5, No. 1, pp. 53–64. KLI, Korea Labor Institute (2009), Analysis of the Current Wage System Prepared for the Minimum Wage Adjustment for the Year 2010 (2010년도최저임금심의를위한임금실태등분석 (임금수준전문위 원회보고자료), in Korean), Korea Labor Institute: Seoul. KOSIS (2010), Household Survey, Korean Statistical Information Service, http://kosis.kr. Malloy, J. (1979), The Politics of Social Security in Brazil: University of Pittsburgh: Pittsburgh, PA. Mesa-Lago, C. (1978), Social Security in Latin America: Pressure Groups, Stratification, and Inequality, University of Pittsburgh: Pittsburgh, PA. MHW, Ministry of Health and Welfare (2015), http://www.mohw.go.kr. The Minimum Wage Council (최저임금위원회) (2015), http://www.minimumwage.go.kr. NPS, National Pension Service (국민연금공단) (1998–2013), The National Pension Statistical Yearbook, National Pension Service (국민연금공단): Seoul. OECD (2007), OECD Health Data 2007, OECD: Paris. ——— (2008),Growing Unequal? Income Distribution and Poverty in OECD Countries, OECD: Paris. ——— (2015), OECD Social Expenditure Database, http://www.oecd.org. Singer, H. (1968), Social Factors in Development: An Overview With Special Emphasis on Social Security, Research Report, No. 27, Department of Health, Education and Welfare, Social Security Administration: Washington, DC. Sung, M. J. (2008),The Effect of Tax and Finance Expenditure on the Structure of Income Distribution and Poverty Rate (성명재, 현안분석 1. 조세·재정지출이소득분배구조및빈곤율에미친영향분석, in Korean), Monthly Public Finance Forum (재정포럼),Vol. 148, pp. 8–28. ——— (2009), Trend of Income Distribution (성명재, 소득분배동향고찰, in Korean), Monthly Public Finance Forum (재정포럼, in Korean), 160, 27–50.

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28 The Japanese welfare state system With special reference to financing health care, pensions and long-term care in a super-aged society Christian Aspalter and Hubert Liu

In the 1970s, with the oil crises, the Japanese government turned away from the idea of a Continental European-style welfare state system for the Japanese society. What followed were many discussions surrounding the differences between “a welfare state” – a European-style comprehensive welfare state system – and “a welfare society” – an Asian-style lighter version of it, a non-redistributive, non-tax-heavy, and social investment-focused welfare state system. This study is focusing on the more professional term of “welfare state systems” instead of welfare states or welfare societies (see Aspalter, 2001a, 2003a), as the existence of differences among systems are addressed by the term itself, and a more technical (not an emotional or ideological) definition is better to work with when conducting international/global comparison (see Vivekanandan, 2001). Quite a number of Japanese scholars argued that Japan is a “welfare society” rather than a “welfare state” (see e.g. Maruo, 1986; Takahashi, 1997). They assert that public expenditures on social welfare in Japan for a long time were less than in its Continental European counterparts even though the welfare benefits and provisions remained relatively on a decent level similar to that of conventional welfare states. Yet, some discussions focus on the fact that the Japanese welfare state system provides limited welfare benefits and services – specializing primarily only on a few categories, such as public health, education, and children services. Other scholars abroad have shown that the Japanese welfare state system, is not different from other welfare state systems in the region, when looking at an ideal-typical welfare regime perspective (Aspalter, 2005a, 2006, 2008, 2011; Aspalter, Kim and Park, 2009; see also Midgley, 1986; Jones, 1990, 1993; Goodman,White and Kwon, 1998; Holliday, 2000;Tang, 2000;Wilding, 2000; Haggard and Kaufman, 2008). From a real-typical point of view – that takes on a closer view, more focusing on system-details and particular system designs – yet other scholars noted that Japan resembles even to a greater extent its two close neighbors, South Korea and Taiwan (see Kwon, 2005; Lee and Ku, 2007; Park and Jung, 2008).

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Both views – the “ideal-typical” view and the “real-typical” view – are complementary and hence both necessary to get the most complete picture from the Japanese welfare state system (see Aspalter, 2012). The former looks at the larger international and historical picture, while the latter looks at a lower level of institutional details in social security provision, legislation, and administrative operations of the very same welfare state systems. It is important not to mix up the two, and not to compare apples and oranges, when comparing the outcomes of ideal-typical and real-typical research studies, as they employ different methods and follow different aims in comparing welfare state systems (Aspalter, 2012). An ideal type “is obtained by means of a one-sided accentuation of one or a number of viewpoints [characteristics] and through the synthesis of a great many diffuse and discrete individual phenomena (more present in one place, fewer in another, and occasionally completely absent), which are in conformity with those one-sided, accentuated viewpoints [characteristics], into an internally consistent mental image.” (Weber, 2014: 125) The task of the . . . [scientist] then becomes that of establishing, in each individual case, how close reality is to, or how distant it is from, that ideal image [ideal type]. (Weber, 2014: 125) The Japanese welfare state system as it is today is sound and complete as its counterparts in, for example European countries – as it provides health care, pensions, and long-term care, but without causing a direct need for high general tax rates. Nevertheless, the future fate of Japan’s welfare state system is heavily exposed to three major risks. First, the demographic aging trend is continuing mercilessly and revealing its dramatic effects, which did not only change the family’s function in Japanese society, but also impacted economic growth. Second, the exorbitantly high government debts put heavy financial burden on the Japanese government, both on central government level and local government level. As a result, additional monetary social policies (e.g. for welfare provisions in cash or in kind) are constrained by the limited financial sources. In addition, an extended economic depression that had lasted about two decades aggravated the financial crises and limited hence the room for conducting monetary social policies.This development has been the result of the long-term absence of sales taxes, and a low rate of general taxation in the past. Third, economic and social policies are affected by unstable and rotating ruling parties. Unclear and ambiguous alliances between political parties and their factions exacerbated Japan’s political situation, thus delaying the momentum of economic reform and with it economic development. Consequently, these challenges are also deferring the Japanese government to (fundamentally) change and improve further the welfare state system and, hence, respond to the needs of Japan’s super-aged society. In this chapter, we discuss the overall pattern of the welfare state system in Japan, and then explore its fiscal challenges with regard to increasing demands for social security in health care, pensions and long-term care provision, along with the continuing aging trend of an already super-aged society. In view of this, several possible choices and alternative strategies – that are grounded in the normative theory of Developmental Social Policy (DSP) – will be proposed in order to deal with the new challenges in this 21st century in the context of post-industrial and super-aged societies. 470

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The Japanese welfare state system Japan initiated its modernization of social welfare institutions starting from the period of Meiji around the end of the 19th century. In Japan, there were several social welfare legislations implemented, and modern social work was introduced early on (Liu, 2014). Besides the Great Kanto Earthquake in the 1920s, the Second Sino-Japanese War and World War II also greatly influenced the construction of welfare state institutions in Japan (Aspalter, 2001a; Kasza, 2002; Aspalter and Lai, 2003; Aspalter, 2005b; see also Ito, 1995; Liu, 2014). The establishment of a new welfare state system in correspondence with its dramatic economic recovery and unique political economy of the post-war period (see e.g. Muthu, 2006) spurred welfare state development in Japan (see Table 28.1), as social legislation began to broadly cover children, aged people, women and disabled, and so forth. There are several scholars that have identified Japan as a member of a uniform East Asian welfare state regime because their programs and policy strategies have shown major common characteristics (see e.g. Jones, 1993; Goodman, White and Kwon, 1998; Holliday, 2000; Aspalter, 2005a, 2006, 2011). The Japanese welfare state system still relies on strong bureaucratic organizations and, as a result, the welfare state system in Japan is being marked by a strong role of bureaucratic organization and fragile non-government organizations (Yoshimura, 2009). The ideal-typical Pro-welfare Conservative Welfare Regime in East Asia emphasizes the implementation of social welfare policies that also serve to bolster economic growth. Meanwhile, the state seeks to minimize its redistributive, but not regulative (Wilding, 2000; Aspalter, Table 28.1 Past development of social policy in Japan Late 1890s to mid-1930s

Late 1930s to early 1940s

Late 1940s to early 1950s Late 1950s

Early 1970s

Mid-1980s to present

From the early 1990s to present

Early beginnings, mostly marked by a general avoidance of social welfare for all, with the exception of health care insurance (due to the influence of the military in policy making and the selective embracing of German industrial and social security policy). Massive involvement in large-scale wars made governmental social welfare necessary, especially social insurance systems, including an extension of social welfare administration capacity in this period. Impact of foreign occupation and economic expansion, and a limited impact of the Japanese Constitution. New social policies promoted by strengthened leftwing parties on local government level forced the LDP to implement major changes in the fields of pensions and health insurance. Electoral losses compelled the LDP to short-term commitment to social welfare policies. Subsequent economic recessions of the 1970s caused the abolishment of those plans. A rising concern about the fast aging of society, the vast gap between future needs and existing social insurance provisions has become visible, politicians start addressing these problems. Increasing electoral competition; the use of election promises in the field of social welfare in order to win elections becomes more popular.

Source: Based on Aspalter and Lai (2003: 249).

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2005a, 2006) role in social welfare provision, and to rely more on families, NGOs and enterprises for the financing welfare service provision, which employs a social investment strategy, especially in health care and education. It is important to understand the role of “functional equivalence” in social security provision and social policy in general (see Aspalter, 2005a, 2006), and only with this understanding can we grasp the similarities of welfare state systems in East Asia from an idea-typical perspective, where social security systems on the ground have institutional differences, but the overall purpose and outcomes of the systems and system designs are equal or relatively very equal (the same holds true for the Liberal Welfare Regime in Anglo-Saxon countries, see Chapter 2, this volume). The concepts become ideal-typical – that is to say: [empirically] they cannot or can only rarely be found in [their] completely pure conceptual form. (Weber, 2014: 127) Therefore, the Japanese welfare state system provides numerous welfare provisions with one of the lowest levels of welfare state expenditures among OECD countries until the mid-1990s. Japan’s social expenditure increased constantly after 1995 mainly because of its rapid rise in aging population, now having reached levels of overall social expenditure that match those of Continental European welfare state systems! The Japanese welfare state system had lower welfare expenditure up to the mid-1990s (Figure 28.1). But recently Japan was catching up, with social expenditures of 23.1 percent of GDP in 2011. In the last couple of years, to note, the social expenditures have been continuing to increase strongly in absolute terms (see OECD, 2016).

35 30 25 20

1995

15

2014

10 5 0 Japan

USA

UK

Germany Sweden

France

Figure 28.1 International comparison of social expenditures as % of GDP in selected countries (in 1995 and 2014) Note: The data for Japan are for the years 1995 and 2011 (the latest data available for Japan from the OECD). Source: OECD (2016).

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Earlier on, Johnson (1982) asserted that Japan was the first more developed welfare state system in East Asia. He explained how the Japanese government intervenes and organizes state resources for the sake of economic development, and thereby other East Asian countries, such as the four Tiger States that continually followed the trend set by Japan earlier on – starting from the late 1980s (see Midgley, 1986; Jones, 1990; Wade, 1990; Castells, 1992; Holliday, 2000). In this sense, East Asian welfare state systems were later on identified to be fundamentally different from the (1) Liberal/Neoliberal Welfare Regime in Anglo-Saxon countries, (2) the Christian Democratic Welfare Regime in Continental European countries (or corporatist/conservative as Esping-Andersen called it), and (3) Social Democratic Welfare Regime in Scandinavian countries (see Esping-Andersen, 1987, 1990; Aspalter, 2005a, 2006 – for the special role of Christian Democracy in Continental European social policy see also Huber, Ragin and Stephens, 1993; Kersbergen, 1994, 1995; Huber and Stephens, 1999; Aspalter, 2001b; Ebbinghaus and Manow, 2001). From an ideal-typical perspective, the characteristics of the East Asian “Pro-welfare Conservative Welfare Regime” (Aspalter, 2006, 2011) are very different from conventional Western welfare states (see Esping-Andersen, 1987, 1990, 1998, 1999; Pierson, 1991; Gallie and Paugam, 2000; Esping-Andersen and Hicks, 2006; and Chapter 2, this volume). Peng (2005) reviewed the welfare state policy expansion in Japan in the 1990s, and she found that welfare state development in Japan was inconsistent in its social policy development in different stages. Hence, she argues that the Japanese welfare state made a gradual shift from a so-called developmentalist to a more democratic and pluralistic political model. Furthermore, in the 1990s, because of the increase of the elder population and the changing family structure, the momentum of expansion in social care policies strengthened the Japanese welfare state system even though the fiscal deficits were worse in both central government and local governments (Peng, 2005). Given the intensified electoral competition of political parties, the ongoing demographic change pushes the Japanese government to expand more and more its welfare benefits and services for its citizens, especially with the ongoing state of a super-aged society, and soon a super-super-aged society (i.e. 30 percent of the population over 65 years of age). Demographic changes in Japan can be observed from three aspects. First, the rate of the elder population is increasing continually, and it took merely 24 years to progress from 7 to 14 percent. In 2005, the Japanese society has become a super-aged society, in which the rate of elder population had reached 20 percent of the total population. Therefore, the sheer size of the elder population forces the Japanese government to consider their needs and to place a high priority on their opinions in public policy making, in order to win elections and hence to stay in power (see Aspalter, 2002; 2001c). Second, family structures are also changing fast in Japan and preparedness and capacity to look after elder relatives has waned greatly in the past, and is ever more waning. In addition, the average first marriage is taking place at 30.9 years of age for males, and 29.3 years for females (SB, 2014). The number of people who believe in the concept of “double incomes with no kids” (DINK) is growing, which alters the Japanese family structure, which in return from the ground up alters the Japanese economy, as well as the fiscal future of all the social security systems. Conventional social security policies and family policies are thus being rattled. Third, in correspondence with the ongoing aging trend of society, the Japanese elder population continually moves up into higher age segments. Young-old people are considered to be those between the ages of 65 and 74 years, middle-old people are those between 75 and 84, and then people who succeed to surpass 85 years of age may be referred to the older-old. In Japan, the proportion of the older-old dramatically increases faster than the middle-old and young-old.

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Therefore, the social care policies and the facilities for the older-old need to be redesigned in order to deal with their specific needs. The whole of the Japanese economy and society needs to be redesigned from the ground up. First cities have already started to rethink and redesign their urban space, and implement a different public policy regime, as they already are in the stage of a super-super-aged society, with 30 percent and more of their population over the age of 65 (see e.g. Phillipson, 2011). Overall, the elder population is increasing, yet the needs of elder population should be identified and addressed painstakingly. The development of the Japanese welfare state system faces a watershed moment because of demographic change in Japanese society, as the generation of “baby boomers,” that is the people who were born between 1946 and 1965, have started to pass the age of 65 from the year 2011 onwards.This demographic tide was called the “silver tsunami” in Japan and its challenges are definitely changing the Japanese society and economy, and with it its social policy. Given this background, the Japanese welfare state system as it is today will be greatly affected, and it is set to change a great deal in the decades to come. In addition, according to Estevez-Abe (2008), the Japanese social security system is workbased in a dual sense. On the one hand, contributory benefits tie citizens’ benefits very closely to their occupations (see also Aspalter, 2005a, 2006). On the other hand, the paucity of cash benefits and services for average working families mean that “work” is the only means of sustenance for most families. In this sense, indeed, the Japanese welfare state system is more a welfare state system especially drafted to avoid heavy forms of redistribution and constitutes a different model from that of other Western welfare state models (be it the Social Democratic, the Christian Democratic, or the Neoliberal/Anglo-Saxon welfare state regime/model). The idea of a so-called welfare society is focusing on a particular policy orientation towards welfare pluralism. Welfare pluralism or the “welfare society” orientation in the West is mainly represented by the blending of public and private institutional arrangements, or a “public-private mix,” in industrial society – although the boundary separating the public and private sectors is often fuzzy and indeterminate (Rein and Rainwater, 1987). In actual fact, the base of Japanese welfare state system stands on the occupation-related system, and people’s welfare benefits are closely related to their career life (but, so is Singapore, for example, with its Central Provident Fund system in the perspective of “functional equivalence,” see Aspalter, 2005a, 2006). In Japan, hence, the enterprises and employers partly share the responsibility of the state for providing welfare benefits to their employees in the Japanese welfare state system. The Japanese welfare state has developed features that are different from conventional welfare states in Western countries, for example, it avoids massive direct redistribution between and among social classes, its social spending levels for a long time have been relatively low; its tax revenue is small; and its benefit levels are relatively meager (Estevez-Abe, 2008). However, rather than encouraging a laissez-faire form of capitalism – as in the case of the Neoliberal AngloSaxon welfare regime – the Japanese state interferes frequently and extensively in the market. Several scholars point out that Japan uses industrial policy as a form of social policy (Pempel, 1991; Pontusson, 1991; Gould, 1993). However, for example Australia and Austria, too, conducted industrial policies as social policies and vice versa in the past (Castles, 1989; Aspalter, 2003b). So, it is not the existence of this particular trait, but the combination of this trait with other traits that – in total – make up the essence of the Pro-welfare Conservative Welfare Regime in East Asia in an ideal-typical Weberian sense (see Hekman, 1983; Weber, 2014). Estevez-Abe (2008) argues that the welfare state should be observed by its functionally equivalent programs (see Aspalter, 2005a, 2006), including public works, subsidies to rural families, 474

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market-restricting regulations, and employment protections as mechanisms to protect the livelihood of citizens, rather than conventional definitions of social welfare policies. In this way, the analysis of Japanese welfare state is deepened because several functional equivalents in Japan either promote work-mediated welfare benefits or protect jobs. The Japanese social protection systems’ emphasizes on work-based protection and savings-oriented programs controlled by the state – similar to other welfare state systems in the Pro-welfare Conservative Welfare State Regime in East Asia (Aspalter, 2005a, 2006; Estevez-Abe, 2008). Although comparative studies of welfare states in the past have treated Japan as a typical “small” welfare state (Huber and Stephens, 2001; Wilensky, 2002; Iversen and Soskice, 2007) and as not market-oriented as other small welfare states. Japan, however, by no means can be regarded a small welfare state system anymore, having reached the proportions of a Continental European welfare state system, in terms of overall social spending. The Japanese welfare state system has developed a special public-private structure, which is established on the work-based schemes and functionally equivalent programs, such as subsidies to firms and corporations to promote full employment. In this sense, Japan, too (and not just Australia) can be considered “a particular kind of a wage-earners’ welfare state” (see Castles and Mitchell, 1991, 1993; Aspalter, 2003b). The Japanese government prefers to use functional equivalents for providing unemployment benefits, for example, employment protection, public-sector employment, wage subsidies, and public works and so forth (Nicoletti et al., 2000; Estevez-Abe, 2008). The East Asian Welfare State model, or the Pro-welfare Conservative Welfare Regime (in ideal-typical perspective), is not only shaped by the state/government, but also related to the main features of civil society, including the market, the voluntary sector, and the family (Liu, 2014). Goodman and Peng (1996) argued that the Japanese government had attempted to establish a welfare state model based on the minimum security provided by the government plus the spirit of self-help. Nevertheless, the Japanese welfare state system today mainly anchors on three social insurance schemes, including health care insurance, pension insurance, and long-term care insurance, apart from very residual, mainly asset- and means-tested (AMT-type) social assistance programs and services. In a nutshell, we may conclude here that indeed the Japanese welfare state system is very different from its European counterparts, but it has – due to the high degree of aging of its society – already reached Continental European social spending levels.Would it have not already had decided to walk down a different (East Asian) path of welfare state development, the Japanese social expenditures today would be much greater than current-day Continental European or Scandinavian welfare state systems, as the degree of aging is indeed a complete game changer in welfare state economics and politics.

Health care insurance in Japan The history of social insurance in Japan, just as in Germany or Austria, started with health insurance – but with some delay. The 1922 health insurance law was finally implemented in 1927. The main driving force behind health insurance law legislation on both sides of the world was the military that worried about the health status of the population and needed to improve the health condition of prospective and active-duty soldiers. This reflected the very conservative government attitudes towards providing social welfare, even in the case of this contributionfinanced social insurance scheme (see Pempel, 1989; Anderson, 1993; Gould, 1993; Aspalter, 2001a, 2001b; Aspalter and Lai, 2003). 475

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A major boost in terms of social security development in Japan came from its involvement in wars, especially the Second Sino-Japanese War and World War II. At the brink of the Japanese attack on Northeastern China in 1937, the government set up a new Ministry of Health and Social Affairs. A year later, Japan’s vast rural population was enabled to join the national health insurance scheme, as a supporting instrument to the Japanese war activities (the same was the case also with the UK or Australia, where during times of war the welfare state was set up and extended; in the US, for example the first welfare state system was the result of the Civil War, in dealing with the aftermath thereof). In addition, the 1939 Seamen Insurance Scheme offered full protection in all major areas of social security. The New Health Insurance Act of 1958, which was implemented three years later, turned the national health insurance scheme into a mandatory social security system. In 1982, the government went into action regarding the onset of an aged and soon superaged society, and consequently implemented the next major step forward in health care development: the Law of Health and Medical Services for the Elder Persons. This new law went effect the next year and from then on provided publicly subsidized health care services to all the elder persons (70 years and over/65 years and over for Tokyo). But in 1984, the government went back on its earlier decision and introduced co-payments of initially 10 percent, the system of co-payments has been adapted and expanded in the following decades (Palley and Usui, 1995; Fukawa, 2002; Aspalter and Lai, 2003). In 1989, the government again pushed for social security reform to provide for an increasingly aged population and set up the Ten-Year Strategy for the Promotion of Health and Welfare for the Elder Persons, the so-called Gold Plan.This new policy induced a major shift from longterm institutionalized care in hospitals and nursing homes to home programs and communitybased rehabilitation facilities (Ihara, 2016). Five years later, the political climate has changed a great deal as a result of a more competitive political environment in elections and government participation of competing political parties (the long-term majority LDP from now on started to lose elections and experienced being part of the opposition). In 1994, the “New Gold Plan” the government increased its earlier ambitions on health care services to the increasing number of senior citizens in Japan: by boosting (1) home care aides, (2) respite care (short stay) service facilities, (3) day care centers, (4) homevisit nursing care stations, (5) special nursing homes for the aged, (6) health service facilities for the aged, and (7) assisted living facilities (care houses) (Ihara, 2016). The Japanese health care system is a Bismarckian health care system, with many subdivisions for different occupational groups, and different treatment in terms of benefits and government financing. Employee health insurance schemes of large enterprises are well-off in terms of financing. There are government-run employee health insurance schemes for small and medium-sized enterprises, national government employees, local government employees, as well as private school teachers and employees. On top of that, there are communitybased national health insurance schemes for the self-employed and the non-employed and so forth (Uchida, 2012). This elaborate structure is always a costly one in terms of higher administrative costs – that each addition subdivision causes. So, here there is room for cost-saving, by decreasing bureaucratic subdivisions, and hence overall health care costs (see Aspalter, 2017). Another area of major cost saving potentials in the case of Japan, are the prices of pharmaceuticals, which are the second-highest within OECD countries (OECD, 2015a). Nevertheless, Japan’s health care system is one of the best in the world, in terms of quality and control of costs. It is a public health care system that pays particular attention to (1) incentives, for example by way of co-payments, its fee schedule system, as well as drug price standards, 476

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and (2) prevention by way of early and frequent screening (highest usage rates for CT scanners, MRIs, etc.). Japan has a relatively low hospitalization rate, but it has also a very long time of average hospitalization, which in part points to the inclusion of a significant part of long-term care services being provided in the health care sector (Fukawa, 2002; Uchida, 2012; Aspalter, 2012, 2016a; Ellis, Chen and Luscombe, 2014; 2017). The future of public health care in Japan is marked by (1) the historically very conservative position of governments when it comes to social security financing through general taxation, which was avoided for a very long time and is today kept at comparatively very low levels, (2) the general rise in the need for health care services for the growing overall elder population and especially the group of the older-old, and (3) the new electoral environment of Japan, where parties have to compete for votes to stay in power and simply cannot ignore too much the rising needs for health care services in a soon-to-be super-super-aged society.

Pension system in Japan The first significant pension insurance legislation came about in the war period. The 1939 Seamen Insurance Scheme provided pensions for a significant part of the population. In 1941, the Workers’ Pension Insurance Law largely extended the population covered by pension insurance, and so did the 1944 Welfare Pension Insurance Law. The pension system now offered benefits for retirement income, invalidity and death (see Aspalter, 2001a; Aspalter and Lai, 2003). The post-war period in Japan then saw general improvements in social policy, only to be halted once the economy was fully on track, and social policy and social security development became victim of the government’s full-fledged conservative policy convictions. In 1959, the government agreed to put up a new national pension system for those not covered by any other pension insurance system, which was implemented two years later in 1961. Then, it took a long time for the government to improve the social security system in terms of pensions. Only in 1986, after one year of preparation, the government created basic pensions, and incorporated them into the Employees’ Pension Insurance (renamed in 1944) and the National Pension Scheme. The Employees’ Pension Insurance now also covered smaller companies, with five or more employees (Aspalter, 2001a; Aspalter and Lai, 2003). The future of pensions in Japan will most likely be continued to be marked by a great dualism in terms of (1) people covered by those schemes that are run by large enterprises within employment pension insurance system and (2) those who have to make ends meet with the meager benefits provided by the national pension system. The overall benefits for childcare periods have been improved (e.g. in the 2004 pension reform), but the fertility issue is still the greatest threat to the future fiscal stability of the Japanese pension system, and the welfare state system as a whole (see Peng, 2002a,2002b). In addition, Japan is, as a result of the conservative fiscal point of view of governments in the past, plagued by a high degree of old-age poverty, standing at about 20 percent of those over 65 years of age (see Yashiro and Oshio, 1999; Aspalter, 2005b; Kashiwase, Nozaki and Tokuoka, 2012; Bitinas, 2012; OECD, 2015b; MHLW, 2016).

Long-term care insurance in Japan The Gold Plan (1989) and the New Gold Plan (1994), have changed the landscape of health care services for the aged, but long-term care services still needed to be addressed as an increasingly powerful social movement pushed for greater gender equality, the Japanese women’s movement (Aspalter, 2001a; Peng, 2002a, 2002b). 477

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In the context of a new political environment, the Social Security System Review Council recommended in July 1995 the erection of a long-term care insurance system.The law followed in 1997, and was implemented in April of the year 2000 (see Aspalter and Lai, 2003). Partly as a response, partly as a facilitator, the Japanese long-term care Insurance system opened up more opportunities for women to participate in the formal economy. While many women streamed into the labor market and stayed there for longer over their life course, there were also many more opportunities created for women in providing long-term care services, a sector that for the very most part relies on female workers (traditional culture being a main causal factor here) (see e.g. Peng, 2002b;Yamashita, 2011). While the long-term care insurance system enabled, supported and reacted to women’s participation in the labor market, it indirectly also crowded out its effects on gender equality, by creating a segregated female-dominated employment sector, in the provision of long-term care services, largely in the third sector (by NGOs). At least their work was being monetarized and salaries were now being paid. Hence the long-term care insurance system has turned unpaid work into paid work, and therefore is contributing to a higher level of GDP for the Japanese economy. The long-term care system has been set-up perhaps just in time, but the system avoids cash benefits, as for example in the case of Austria or Germany. However, the lack of cash benefits lowers its efficiency, as home services by family members are, hereby, being not encouraged, and institutional and other-than-home-based family care are more expensive. The system of determining the benefit level, too, is inefficient, by using a survey, instead of for example government doctors, as in the case of Austria. As a result, the Japanese long-term care system is struggling with a relatively high number of cases in the lower-benefit classes, which causes a heavy additional cost burden. In addition, the Japanese long-term care insurance system suffers from other shortcomings, such as: (1) service inadequacy (not enough services provided), (2) service quality due to existing problems with service quality control mechanisms applied, (3) inaccuracy in selecting and determining the need for care services (e.g. a sick and a healthy spouse were treated equally in the determination of care needs), (4) co-payment fees are too high for very poor and poor local governments, as well as by poor people who cannot afford co-payments imposed, and (5) home care is not supported as costs for meals, transportation, haircuts, outings, and hospital visits are not covered by the reimbursement system of the long-term care insurance (see Aspalter and Lai, 2003: 253–254; Lai, 2002). All in all, the long-term care insurance system in Japan that relies on non-governmental service providers is very inefficient, as a great deal of administration and highly complex procedures and regulations are driving up costs of the overall system. The contract-based service provision mostly by the private sector in addition helps to explode costs, as an endless number of contracts need to be set up and enforced – which is not supported, in addition, by the existing local culture (Aspalter and Lai, 2003: 253–254; Lai, 2002).

On the future of the Japanese welfare state system: financing health care, pensions, and long-term care in a super-aged society The Japanese health care system is one of the best in the world, besides those of Singapore, Hong Kong, Iceland and Finland, in terms of both overall health care outcomes and efficiency (ratio of input, i.e. expenditures, to output, i.e. health care outcomes) (see Table 28.2). Nevertheless, the onset of a super-aged society came early and it is, in the case of Japan, relentless, meaning it will continue to go up and up for a long time yet to come.The IMF is expecting the Japanese health care expenditure to reach 15.5 percent of GDP in the year 2030 (Nozaki, Kashiwase and Saito, 2014). As early as the year 2022, Japan may enter a new stage of its demographic development what may be called a super-super-aged society (Durden, 2015). By the year 2030, Muramatsu and 478

The Japanese welfare state system Table 28.2 Comparison of health care outcomes and health care expenditures (selected countries) LE(b) 2013 IMR 2013 Tot. HC Exp., Gov’t Exp. as Per Capita Per Capita Per Capita as % of GDP % of Tot. HC. Exp. on HC, Private Exp. on Gov’t Exp. on 2012 Exp. 2012 as PPP$ HC, as PPP$ HC, as PPP$ US Switzerland Austria Germany Sweden France Canada Japan Iceland UK Finland Singapore Cuba

79 83 81 81 82 82 82 84 82 81 81 83 78

5.9 3.6 3.2 3.2 2.4 3.5 4.6 2.1 1.6 3.9 2.1 2.2 5.0

17.0 11.4 11.1 11.3 9.6 11.6 10.9 10.3 9.0 9.3 9.1 4.2 8.6

47.0 65.8 75.9 76.7 81.3 77.4 70.1 82.1 80.5 84.0 75.0 35.9 94.2

8,845 5,992 4,812 4,635 4,041 4,213 4,610 3,632 3,485 3,235 3,497 3,215 405

4,688 2,049 1,160 1,080 756 952 1,378 650 680 518 874 2,061 23

4,157 3,943 3,652 3,555 3,285 3,261 3,232 2,982 2,805 2,717 2,623 1,154 382

Source: WHS (2015).

Akiyama (2011) expect that one-third of the population will be over 65 years of age, and onefifth will be over 75 years.The government predicts the share of population over 65 years of age may reach 40 percent as early as the year 2050 (  JT, 2014; Durden, 2015). Besides the comparative finding that the Japanese health care systems does a very fine, if not excellent job relatively speaking (for Bismarckian social insurance-based health care systems!), in keeping its rates of effectiveness and efficiency up high, there is still room to worry a great deal about the future of the Japanese health care system. First of all, the costs are – due to the sheer number of aged population – still skyrocketing, perhaps manageable still so. There is a tendency of increased health care costs due to chronic disease (Uchida, 2012), and in the last decade at least the effect of any healthy aging (more people are aging more healthily than before) thesis has not been felt, that is, was not empirically significant: partly due to the fact that, in Japan, people are already living, and hence aging, relatively very healthily, and partly due to increase in dementia, and the lessening capacity in family care, which has been and is plummeting rapidly in a historical perspective (see Nozaki, Kashiwase and Saito, 2014: 5; Shimizutani, 2013: 20). In addition to (1) old-age poverty due to extreme low pension benefits offered by the national pension system (and that are expected to drop even further) for the general population, outside the more generous employees’ pension system, and (2) the yet to be solved problems of improving the Japanese health care and long-term care systems, we may expect large troubles on the horizon of social security systems financing in the case of Japan in the next couple of decades – the development of which is set to peak around the middle of the 21st century. Currently pension expenditures stay at 12 percent of GDP. After the reforms have fully set in, which are expected (by the government) to help reduce pension expenditures by up to 2 percent of GDP (see OECD, 2015c), pension costs are again set to increase more or less proportionally, with the increasing share of the elder population. New pension reforms have lowered pension expenditures by increasing the pension age, increasing contribution rates and decreasing benefit levels (see Bitinas, 2012: 272; OECD, 2015c). However, (1) fertility is still far below replacement levels (a total fertility rate of around 2.1), and (2) the rapid aging trend of the Japanese society causes, combined with the huge public debt 479

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ratio of 229 percent of GDP (OECD, 2015c), a major fiscal blow to the Japanese pension system in particular, as well as the overall welfare state system. Hidden from the eyes of many foreign observers, long-term care costs in Japan (like elsewhere, e.g. the UK or Hong Kong) are hidden within general health care costs, as many hospitals “actually function as nursing homes” (Ikegami and Campbell, 2016), local government administrations in charge of long-term care insurance refuse to take on these costs and have hence opposed any change with regard to this situation in the past (Ikegami and Campbell, 2016). Bearing that in mind, the long-term care costs are set to increase to 3–4 percent of GDP by 2050 (i.e. not including the nursing function that is taken care of by the health care system) (see Olivares-Tirado et al., 2011). All in all, fiscal sustainability of the Japanese welfare state system is threatened by the sheer size of the increase in elder citizens and the concurrent, long-term slump in the number of children being born. Cutting pension benefits for already poor elder persons is not helpful in solving the social problems of Japanese society today. The government of Japan, on the contrary, should focus on increasing efficiency of all major social security and social assistance (see Midgley and Aspalter, 2016) systems and devise a detailed plan about how to take care of a super-super-aged society that may well have 40 percent of its population over the age of 65, be it in the year 2050 or 2060 (depending on different projection models used by various government agencies in Japan). Also, increasing the birthrate, and perhaps, in addition, a controlled and highly selective approach to immigration (e.g. domestic helpers, long-term care workers, nurses and social workers), may help to overcome the otherwise unsurmountable absolute policy dilemmas of the Japanese government in the decades to come, with all their repercussions on society and economy. Figures 28.2 and 28.3 show that Japan has become a full-fledged comprehensive and already expenditure-heavy welfare state system, which is keeping its special characteristics of an East Asian version of welfare capitalism or welfare state model, along the lines of the Pro-welfare Conservative Ideal-Typical Welfare Regime in East Asia.

Figure 28.2 The development of social expenditures in Japan (% of GDP; 2000–2016) Notes: Housing also includes community amenities; social security here includes social insurance (other than health insurance) and social assistance. Source: Calculated from ADB (2016).

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Figure 28.3 Fiscal indicators for Japan (% of GDP; 2000–2016) Source: Calculated from ADB (2016).

Conclusions The Japanese welfare state system as it is today has major positive achievements to look back to, and major pitfalls yet to address at the same time. The health care system in Japan is one of the best in the world – at least among the rim of Bismarckian social insurance-based social security systems – in terms of effectiveness and efficiency, given the super high number of elder people of Japan as a percent of overall population and for example a very low infant mortality rate (IMR), which signals strong health care standards, with appropriate levels of quality and quantity of health care services. Singapore and Hong Kong, for example, can rival very easily its front position in a worldwide comparison, each of which employs very different health care system designs (a provident fund system in the case of Singapore, and publicly heavily subsidized quasi-universal health care system in the case of Hong Kong) (see e.g. Aspalter, 2007, 2017; Lewis, 2009). The pension system as a whole basically divides the population into those who work for large enterprises and get good benefits, and those, the rest of the population, who need to expect to be poor when they get old, for a couple of decades. The Japanese long-term care system has a number of shortcomings that are yet to be addressed properly, and the health care system, too, shows areas that are waiting for improvement, especially in terms of cutting administrative costs, but also high prices for pharmaceuticals. In the Japanese welfare state system, social assistance (which has not been covered above) is rudimentary and for the most part asset- and means-tested, which is also highly ineffective and inefficient, and in effect a counter-productive way to conduct an anti-poverty policy. All asset- and means-tested (AMT-based) social welfare benefits and services, in fact, increase (not decrease) poverty, the severity and the quantity of it (see Aspalter, 2014, 2016a; Walker and Aspalter, 2015; Aspalter and Teguh-Pribadi, 2016; Aspalter, Teguh-Pribadi and Gauld, 2017; Midgley and Aspalter, 2016). All forms of asset- and means-tested benefits and services (AMTs) need, hence to be replaced with universal benefits and services (UBS) and non-economically targeted benefits and services 481

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(NETs) that focus on, for example geographic, social or household targeting, and personal changes in behavior (e.g. attending seminars, getting health check-ups) (see Aspalter, 2016c). The overall financial difficulties of the Japanese government are not the result of Japanese welfare state system, but the direct outcome of low general taxation. In a state of being a superaged society, and soon super-super-aged society (especially with the current-day design of the Japanese social security system), these lower levels of taxation are not sustainable in the long run. A social security system that is based on provident fund systems (PFS) – for health care, pensions and long-term care needs – would reduce the need for public social funding a great deal, as the case of Singapore has shown to the world (and the implications of which have been ignored so far) (see Aspalter, 2016b). The overall high government deficit of Japan hence is an economic and political choice of many governments of the past, and not the particular outcome of the Japanese welfare state system. Recent spending increases of the government are partly due to welfare state spending and partly due to increased military spending. Necessary taxation and economic reforms are being delayed by political impasses, by different leaders, factions and political parties and their day-to-day politics. Japan’s welfare state system needs systematic changes: that is, structural changes of the social security systems implementing a new system-design with new funding (and incentive) mechanisms, with more fully funded defined-contribution (DC) elements, and other major internal cost saving reforms. If all these pitfalls of the current-day Japanese welfare state system are being addressed properly and maximum levels of efficiency (and cost avoidance) of the welfare state system have been ensured – as recommended by Developmental Social Policy (DSP) – the future of the welfare state system even in a super-super-aged society (30% or more the population being 65 years of age) is to a large extent manageable at least, but certainly not rosy. But that is a lesson of the greatest value for social policy and economics – from a global, historical perspective. In order to do so, however, The goals of social development policy are more readily achieved if there is social harmony among various groups of people and if there is congenial political climate in which instead of opposing for the sake of opposition, various political parties constructively cooperate with one another on common issues of national interest. (Singh, 2008: 208–209)

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29 Lessons from around the world By way of conclusion Christian Aspalter

The future of social policy is positive. Better and more social policy is needed to save hundreds of millions, if not a couple of billions, of lives from preventable poverty, suffering and deaths. Social policy is also very much needed to improve our lives, including improving our economic conditions. Social policy is to be seen as “an input factor to economic growth” (Aspalter, 2006), a necessary element for success of economies, the cases of, for example Sweden, Austria or Singapore, show how important investment in people, investment in health and education, investment in harmony and social development is for the future of societies and economies alike. The last two decades, and particularly developments in the last couple of years, have shown that developing countries are not only catching up, but much more so, taking over innovation and setting up a new social rights perspective, a new human rights perspective in social policy. Medicine and food, and not just work, have become a universal human right in India. Health care, for example, for some time now, has been a universal human right in, for example Cuba, Kazakhstan or Sri Lanka – and the latest very fortunate extension of health insurance coverage in terms of population covered in the US (even though the type of system applied is very unfortunate) is also making a step in the right direction for humankind. Universal social benefits and universal social services are among the very best, that is the most effective and economically most efficient, social programs there can be. A recent wave of new universalism, that is, universal social programs, has conquered Asia: especially all across Central Asia (e.g. Kazakhstan), Southern Asia (e.g. India and Sri Lanka), Southeast Asia (e.g.Thailand and Indonesia) and East Asia (especially Taiwan, and so some degree Mainland China). This book has hopefully, a tiny, but perhaps significant part contributed to the extension towards a global social policy focus in research, in particular empirical comparative and comparative theoretical social policy research. If one only knows the welfare state system of e.g. the United States, one knows nothing about social policy: as any perspective of how good it is, or how not good it is, is missing, as well as any idea to avoid problems and to apply improvements that are already implemented elsewhere are missing completely from the picture or mind of any expert or policy maker

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that ever has focused only on one particular welfare state system, be it the US, Sweden, Brazil, Hong Kong, or Singapore. In addition, perhaps the most important lesson of all, is not only is it crucial how much social policy and social welfare budgets are being spent, but even more so, how one does social policy and how one spends the money.The wrong social policies in fact have poverty increasing, that is poverty trapping side effects – these are: poverty-increasing asset- and means-tested social assistance or social service programs (AMTs), or any social assistance programs (such as, conditional cash transfer programs) that contain an element of asset- and means-testing (AMT) in determining welfare eligibility, as they punish people for doing the right thing and rewarding the absence of doing the right thing (saving more, working more hours or more jobs, etc.). Also, efficiency is key for social policy to do its job, to save hundreds of millions of lives from poverty, hunger, abuse, discrimination, social exclusion, accidents, illness, and premature/ preventable deaths. All forms of asset- and means-tested benefits and services programs (AMTs) and mandatory private insurance programs (e.g. ACA or Obamacare in the US, a famous recent example of this category) are among the very worst forms of social policy that waste a large share of the welfare budgets on administration and organizing regulations (often monstrous amounts of dehumanizing regulations), instead of investing it in food or medicine, education/ employment training or housing for the poor. These AMT-based or AMT-containing social programs need to be fully replaced with universal benefits and services (UBS) and/or non-economically targeted (NET-based) social assistance benefits and social services (Midgley and Aspalter, 2016), to avoid the unwarranted dire consequences of a “poverty trap” and “savings trap,” as well as an “unemployment trap,” that locks up hundreds of millions of people in poverty and destroys hundreds of millions more children’s live perspectives, by enforcing a social policy regime that only “manages” poverty but also increases the extent and severity of the very same – and instead does not solve or end poverty. One important lesson for the future is to focus more on DC elements and DC systems in social security systems across the world (i.e. provident fund systems of all kind), and especially move away from relatively also very costly Bismarckian social insurance systems: they are costly in terms of unnecessary occupational and geographic subdivisions of administration that not only waste budgets available for social security, but also create tremendous economic inefficiencies in terms of prohibiting and punishing labor mobility. When it comes to health care and long-term care, fully funded DC systems award the ones who manage to live healthily and happily, that is they reward the ones that do the right thing. Any kind of social insurance system in health care and long-term care, however it pays money (1) to those who either are just unlucky (the original idea of why these systems came into being in the first place, where lifestyles and consequent modern mass diseases, like cancer, Alzheimer’s disease, were small in comparison to other causes of illness, like e.g. communicable diseases), and (2) to those who live a risky or unhealthy life in terms of unhealthy life-styles, especially regarding food and drink, stress, and exercise. The first category of beneficiaries has been shrinking over the centuries and came to represent only a tiny fraction of all beneficiaries, while the great majority of health care problems that mandate health care and long-term care services today are in fact the direct or indirect result of post-modern life choices: for example life-styles, consumption patterns, lack of exercise, and/ or the presence of constant stress and happiness-impeding life events and developments (e.g. massive number of divorces and family break-ups, the rise of new mental health problems, longterm relative or absolute lack of income).

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To manage how money flows will not be enough in social policy in the decades to come – especially in times of constant fiscal constraints of the state in most countries around the world. Governments and social policy experts have to start to focus on the prevention of problems: first, on the “micro-economic incentive structures” ( positive and negative rewards of all kinds, current and future) of existing social policies, social insurance and social assistance programs; and second, on non-monetary social policies that find other ways to influence and guide individual and social behavior, and/or provide information about different life-styles and consumption patterns/choices, and behavioral choices and their likely long-term health care effects from a life-cycle perspective. Apart from economic incentive structure, other behavioral incentive structures are also yet to come to the fore of social policy research and policy making: for example institutional and managerial setup of social programs, social security systems or social policy evaluation systems. In terms of social policy evaluation and guidance systems, two policies stand out in international comparison. First, the Open Method of Coordination (OMC) as it is practiced in the European Union, which could, and should be, the model of how to concert and boost the quality and quantity of social policies and institutions across different federal states or provinces in, for example China, Brazil, the Russian Federation or the US; or all of Africa, if the African Union is or could embark on a similar mission in social policy as the European Union. Another very outstanding, important case in point here is the “barcode system” in the Belgian health care system, although still being moderate and “soft” in its application, it shows a powerful way to control cost-explosion in the health care sector, by electronically, centrally, and instantly (through the use of an intranet) gathering all relevant information of a health care system. That is, every doctor, every patient, every medicine, every treatment, every department in hospital, every hospital is assigned with a barcode, and all information – in a much-upgraded version that is distinct from the currently existing Belgian version – is being statistically processed, and an automatic ranking is given to all doctors, all doctors of a specialized field, all departments of a specialized field, and all hospitals as well, and, very important, this information is made – instantly without intermingling of administrators or politicians – publicly available to the general public (on the internet), current and future patients alike, as well as the key players in the health care market, the hospitals and doctors that prescribe medicines themselves. Hence, this would achieve transparency to a much-needed much higher level, and change behavior of hospital managers and administrators and doctors themselves, as they know their ranking will lower in case of any overprescriptions of unnecessary and expensive medicines and overuse of unnecessary and unnecessarily expensive procedures (treatments and tests, etc.). This would lower the percentage of GDP spent on health care and/or, more importantly, increase the available amount of money for additional treatments and medicines for formerly not covered (by public health care) patients, especially for more preventative health check-ups for the general population, which together will make possible the saving of thousands if not millions of lives in many countries that have yet to apply an extended/upgraded version of this barcode system in their health care systems (see Aspalter, 2016a). Advertisements in the public interest (APIs), as exemplified in the case of Hong Kong (even though there is room for improvements in terms of content and concertation of advertisement spots in the case of Hong Kong), are one very positive way forward. We have to move away from a mostly curative approach to a dual preventative and curative approach in social policy, especially health policy, mental health policy, and long-term care policy.

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We need to prevent more cancer, Alzheimer’s disease, high blood pressure, depressions, extreme mood disorders, obesity, intoxication through chemicals (preservatives, colorings, artificial flavorings, and other in the short- or long-run toxic chemicals) in foods and drinks, addiction to sugar (particularly by way of soda drinks), excessive alcohol consumption and smoking, unnecessary traffic accidents, consumption/addiction to harmful narcotics and so forth wherever we can, with any current public and social policy measure or any perceivable, possible (ever more innovative and integrated) public and social policy measure yet to be implemented in the years and decades ahead (see Aspalter, 2017). Some countries have already experimented with behavioral change, particularly Latin American countries, but now also countries in the Caribbean, Africa and Asia, have already jumped on the bandwagon and installed not just human-capital, social-capital, and cultural capital (= capabilities) enhancing social policies and programs, but also behavior-changing social programs, which are now widely practiced across, for example Latin America and India (see Aspalter, 2016). There is no limit to the list of possible programs and their specific conditions in terms of changing individual behavior: such as getting more health check-ups, monitoring and advising on nutrition for better infant and child health, improving school attendance rates, attending training and educational seminars, attending self-help groups, attending/passing short exams (e.g. about awareness of problems or causal connections between behavior/lifestyle and consumption patterns and ill-health) and so forth. Changing lifestyles needs to rise to the top social policy agenda for social policy (including health policy) experts and government officials alike, by the hundreds of millions, at least lowering the burden of diseases and premature/unnecessary deaths to as much as we can, given the fact that people are not perfect and will never be fully perfect in their life choices, but at least let them be perfectly informed and make their individual free choices based on the whole body of available information that current-day science provides us with, by way of comprehensive informative social policy. Another important lesson we need to draw from social policy experiences from around the world is that labor market incomes are being polarized in insiders and outsiders of a good/ decent family income and, hence, good/decent family life. Also, at the same time, salaries are going down for those outsiders as these salaries now depend on short-time and part-time employment, that are the outcome of neoliberal doctrines of a great and growing number of government officers and managers. Non-salaried incomes are becoming more and more important, while salaried incomes are becoming less and less important overall, as they fall for outsiders, and as they become crowded out by other forms of income (capital incomes) for insiders (see Kim, 2008; Kim and Hießl, 2016). As a result social insurance systems around the world need to learn partially from the French experience, the Contribution Sociale Généralisée (CSG) (see Chevalier and Palier, 2016). A modified version of the CSG – one that only focuses on non-salaried incomes (i.e. capital incomes only, not all sorts of incomes) – is the only real major alternative to keep social insurance systems afloat in times of dualistic, neoliberalist labor market realities and a constant fiscal crisis of nation states (and regional governments) around the world (see Aspalter, 2009). Levying social insurance, or general social security, contributions on all forms of capital income (rent income, income from financial markets, business income, and other forms of wealth creation, especially through real estate transactions, etc.) is the only way forward for stressed-out welfare state systems to rescue their fiscal outlook for the decades ahead (in fully or already partially post-industrial societies), apart from a less-advantageous and hence non-preferable solution of retrenching and privatizing welfare state institutions to the level that they become ineffective and insignificant, that is obsolete. 490

Lessons from around the world

References Aspalter, C. (2006), Freedom, Dehumanization and Welfare: An Asian Perspective, Journal of Comparative Social Welfare,Vol. 1, No. 2, pp. 95–114. ——— (2009), Pension Coverage and Demographic Aging in Asia, keynote speech presented at the Regional Social Security Forum for Asia and the Pacific of the International Social Security Association (ISSA), hosted by the Government of the Philippines, Manila, October 21–23. ——— (2016), Categorical and Conditional Cash Transfer Systems in Latin America and the Caribbean, in C. Aspalter and K. Teguh-Pribadi (eds.), Development and Social Policy:The Win-Win Strategies of Developmental Social Policy, Routledge: Oxon, UK. ——— (2017, forthcoming), Saving Lives Through Health Care Policy: A Developmental Social Policy Perspective, in C. Aspalter, K. Teguh-Pribadi and R. Gauld (eds.), Health Care Systems in Developing Countries in Asia, Routledge: Oxon, UK. Chevalier, T. and Palier, B. (2016), The French Welfare State System, chapter 13, this volume. Kim, J. (2008), discussion with, Seoul, November. Kim, J. and Hießl, C. (2016), The South Korean Welfare State System, chapter 27, this volume. Midgley, J. and Aspalter, C. (2016), Developmental Social Policy:Theory and Implementation, in C. Aspalter and K. Teguh-Pribadi (eds.), Development and Social Policy:The Win-Win Strategies of Developmental Social Policy, Oxon, UK.

491

Index

70 y Más, Mexico 125 Abachi, Sani 181 Abbott, Tony  83 Abrahamson, Peter 2, 15, 41–70, 87–105 Abu Sharkh, Miriam 64 activation 49, 62, 97, 219–21, 226, 231, 241, 248, 254, 271, 275, 279–80, 285–7, 463 Acuña, Rodrigo 148 Afghanistan 297 Agartan, Tuba Inci 8, 317–29 Age Pension, Australia 72 Aid to Families with Dependent Children (AFDC), USA 91, 103 Akiyama, Hiroko 479 Algeria 58–9, 297 Allocation de Solidarité Spécifique, France 219 Allocation Unique Dégressive (AUD), France 219 AMTs (asset and means-tested social benefits and services) 4–5, 10–11, 25, 30, 87–105, 169–73, 204, 481, 488 Andrews, Kevin 80, 82–3 Angola 23 Aotearoa see New Zealand APIs (advertisements in the public interest) 360, 489 Arab Spring 41, 59 Arbeitslosengeld II, Germany 248–9 Argentina 21, 26, 31–2, 50–3, 62, 112, 158, 164, 166, 168–9, 172 Aron, Raymond 453 Artaza, Osvaldo 143 Asian Financial Crisis 41 Aspalter, Christian 1–40, 155–77, 347–64, 469–91 asset and means tests see AMTs Australia 2–3, 21, 25, 53, 71–86, 158, 165, 168, 172, 296, 411, 474–5 Australian Council of Social Service (ACOSS) 76 Australian Labor Party 79 Australian Youth Policy and Action Coalition 76 Austria 6–9, 16, 21, 158, 165, 244, 258–73, 282, 284, 325, 474–5, 478–9, 487

492

Ayrault, Jean-Marc 221 Aysan, Mehmet 58 Babangida, Ibrahim Badamasi 181 Baby Bonus, Singapore 385 Bachelet, Michelle 151 bad CCTs 6, 169–73 Badan Penyelenggara Jaminan Sosial (BPJS), Indonesia 9, 369, 378–9, 381 Bahamas 166 Bahrain 23, 27, 58–9, 297 Balladur, Edouard 220 Bangladesh 297, 354–8 Barr, Nicholas 187 Basic Disability Pension, Chile 150 Basic Old-Age Pension (BOP), Korea 462, 464 Basic Solidarity Pension, Chile 150 Bauman, Zygmunt 198 Belarus 168, 297 Belgium 6, 21, 158, 165, 229–44, 297 Belize 166 Benefício de Prestação Condinuada, Brazil 162 Benevolent Society, Australia 76 Berlin Wall  41 Beveridge model 25, 30–1, 204, 217, 224–5, 332, 334 Beveridge Report 192 Beveridge, William Henry 191–2 Bismarckian model 6–8, 11, 25, 27, 30–1, 157, 159–60, 169, 216–17, 223–6, 229–31, 244–5, 252, 254, 271, 350, 476, 479, 481, 488 Black Thursday 41, 90 Black Tuesday  90 Blair, Tony  5 Bleses, Peter 253 Blond, Philip 83 Boko Haram 180 Bolivia 50–3, 158, 164, 166, 172 Bolsa Família, Brazil 64, 159, 162, 167 Bonvin, Jean-Michel 7, 274–88 Borzutzky, Silvia 4, 138–54 Brasil Carinhoso, Brazil 164

Index

Brasil Sem Miséria, Brazil 163–4 Brazil 1, 4, 10, 23, 26, 33, 50–1, 53, 62, 64–5, 155–7, 296, 324, 352–7, 489 breadwinner model 205, 261, 275, 285 British Mandate of Palestine 334 Bug˘ ra, Ayse 318 Bulgaria 48, 297 bureaucracy, and the welfare state 16, 156, 272 Burkina Faso 297 Cambodia 53 Cameroon 23, 179 Canada 8, 21, 25, 108, 135, 158, 165, 168, 297, 479 Cantillon, Bea 6, 229–57 Cardoso, Fernando Henrique 155–6 Casey, Bernhard H. 188 Castro, Fidel 106, 110, 112 Castro, Raúl 106, 116–18 CCTs (conditional cash transfer programs) 6, 30, 122–35, 169–73, 361 Center Party, Germany 16 Central Provident Fund (CPF), Singapore 385–92 Cerami, Alfio 294, 309 Chaebols 56 Chernova, Zhanna 295 Chevalier, Tom 5, 216–28 Chicago Boys 146 Child Development Fund, Hong Kong 424–5 child malnutrition 122, 131, 357–9 child mortality rate 165–6, 168, 359 Chile 4, 21, 26, 50–2, 55, 62, 112, 125, 134–5, 138–54, 158, 166, 168–9, 172, 186–7, 189, 326 China 1, 10, 21, 25, 28, 31, 33, 44, 55–8, 64–5, 158, 178, 347, 354–7, 365, 383, 398–420, 456, 476, 487, 489 Chinese Communist Party 57, 64 Chow, Nelson W. S. 429 Civil Rights Movement, USA 90 Civil Servant and Pensioner Health Insurance (ASKES), Indonesia 366, 368–9, 377 Civil Servant Insurance Savings (TASPEN), Indonesia 366, 368–70, 377, 380 Civil Servant’s Welfare Fund (DASPERI), Indonesia 368 Civil War, USA 89 Clinton, William Jefferson “Bill” 91, 97 Cold War  28 Collor de Mello, Fernando 155–6 Colombia 50–1, 62, 158, 166 Commission of Inquiry into Poverty, Australia 72 Commission on Poverty, Hong Kong 420 Commonwealth Employment Service, Australia 79 communicational social policy 360–1 Community Based Health Insurance Program, Nigeria 183 Community Care Fund, Hong Kong 426–7

Community Housing Federation of Australia 81 Comprehensive Social Security Assistance (CSSA), Hong Kong 421–3, 427 contractualization 279–80 Contribution Sociale Généralisée (CSG), France 220, 490 Cook, Linda J. 293–4 Cortes, Rosalia 160 Costa Rica 26, 28, 50–1, 53, 62, 155, 164, 166, 168 Costello, Peter 78 Côte d’Ivoire see Ivory Coast Couverture Maladie Universelle (CMU), France 225 Cuba 3, 19, 22–4, 28, 33, 50, 106–21, 164–5, 168, 172, 479, 487 cultural social policy 29, 361 Cutright, Phillips 453 Cyprus 296 Czech Republic 17, 21, 158, 165, 168, 297 Dahmen, Stephan 7, 274–88 decommodification 87 De Graeve, Diana 6, 229–57 dehumanization 360 Democratic Progressive Party (DPP), Taiwan 439 Democratic Republic of Congo 23, 353–9 Denmark 5, 21, 24, 158, 165, 168, 204, 234, 244, 282, 284, 325, 452 Destremau, Blandine 58 Developmental Social Policy (DSP) 7, 10–11, 28–30, 470, 482 Diamond, Patrick 49 Diamond, Peter 187 direct cash transfer (BLT), Indonesia 367 disability pensions, Switzerland 279–80 disability support pension, Australia 72–3, 75, 77 Djibouti 297 Dolinskaya, Irina 293 Dominican Republic 50–2, 166 Dostal, Jörg-Michael 9, 188, 365–82 dual VET (vocational education and training) system, Switzerland 282–7 dual welfare state systems 1, 5, 75, 317 Dusseault, David 310 Earned Income Tax Credit: Israel 336–7, 339; USA 95 East Timor  53 economic freedom 419 Economic Opportunity Act, USA 91 Ecuador 50–1, 166 education policy, Switzerland 282–7 Egypt 58–9, 297 Ellis, Frank 60 El Salvador 50–2, 158, 166, 168, 172 Elveren, Adem Yavuz 8, 317–29

493

Index

Employees’ Provident Fund, India 350 Employees’ State Insurance, India 349 Employer Pension Funds (DPPK), Indonesia 370 Employment Insurance (EI): Korea 453; Taiwan 437–8 English Poor Law 3, 77, 193 environmental social policy 361 Esping-Andersen, Gøsta 2, 15–17, 50, 71, 87–8, 94, 229–30, 317, 392 Esteves-Abe, Margarita 474 Estonia 93, 296–7, 326 Ethiopia 186 Etieyibo, Edwin 185 ETs (economically targeted social benefits and services, or AMTs) 87 European Union 61, 63, 212, 258, 261–2, 270, 287, 327, 489 Family Burden Compensation Fund, Austria 258–9, 261 Family Hope Program (PKH), Indonesia 367, 375 family policy, Switzerland 281 family wage 245 federal subjects, Russian Federation 8 Female Charitable Society, USA 89 Fiji 64 Filgueira, Fernando 51 Fillon, François 221 Financial Service Pension Funds (DPLK), Indonesia 370 Finland 5, 21, 24, 158, 165, 168, 234, 478–9 Five Guarantees Scheme, China 404, 412 Fleury, Sonia 160 flexicurity, idea of 264 Fome Zero, Brazil 163 Fondo Nacional de Salud (FONASA), Chile 141–2 Food Bank, Hong Kong 427–8 France 5–6, 9, 21, 88, 93, 158, 165, 168, 216–28, 296, 405, 472, 479 Franzoni Martínez, Juliana 50 freedom from want 192 freedom of choice 79, 229, 232, 274, 278 frozen landscapes, in social policy 245 frozen welfare state 230 functional equivalence, principle of 25, 472 Gal, John 8, 332–43 Gao, Qin 58 Garfinkel, Irwin 94 gender equality, Turkey 329 general health insurance, Turkey 317, 320 generational equity 7, 250, 329, 447 German Empire 244, 258 Germany 6–8, 16, 21, 26, 30, 57, 158, 165, 168, 244–58, 269, 282–3, 297, 325, 452, 465, 472, 475, 478–9 494

Gertler, Paul J. 130 Gillard, Julia 79–80 “Girls, Let’s Go to the School” campaign, Turkey 324 Glied, Sherry 102 global social policy 1, 487 Golden Age, Germany 250 Gold Plan, Japan 477 good CCTs 170–3, 361 Gorbachev, Mikhail Sergeyevich 292 Gough, Ian 64–5 Government Employee and School Staff Insurance (GESSI), Taiwan  437 Gowon,Yakubu  181 Great Kanto Earthquake 471 Great Society, USA 90–1 Greece 46–7, 165, 296 Grossman, Guy 58 Grow First, Distribute Later, idea of 454 Guatemala 50–2, 158, 166 Gunes, Erkan 58 Guyana 166 Habsburg monarchy 258 Haiti 52, 166, 297 Hall, Stuart 196 Ham, Chris 195 Hansan, John E. 99 Head Start, USA 98–9 health care insurance, Japan 475–7 health care system, Switzerland 278–9 health insurance for the poor (ASKESKIN, now JAMKESMAS), Indonesia 367, 371–2, 375, 379 Heath, Edward 193 Hießl, Christina 11, 451–68 Hills, John 48 Hinrichs, Karl 7, 244–55 Hinz, Richard Paul 448 Hockey, Joe 80 Hoddinott, John 130 Holmes, Rebecca 183 Holocaust 332 Holzmann, Robert 448 Homelessness Australia 81 Honduras 50–3, 166, 172 Hong Kong 10, 21, 25, 28, 55, 57, 64, 158, 172, 297, 383–4, 412, 419–32, 478, 480–1, 488–9 Hort, Sven E. 55 housing policy: China 405; Israel 339–40 Howard, Christopher 93 Howard, John 75, 78–9 hukou (household registration) system, China 413 human capital 6 Hungary 17, 21, 93, 158, 268, 326 Hyde, Mark 4, 138–54

Index

Iceland 5, 21, 158, 165, 297, 478–9 ideal-typical method 2, 5, 7–9, 15–28, 32, 88, 157–8, 173, 469–75, 480 Iglesias, Augusto 148 ILO Social Protection Floors Recommendation 46 In Care of the People program, Nigeria 183 Inclusion Australia 81 income management, Australia 81–2 India 1, 8–10, 17, 19, 23, 26–7, 32–3, 64–6, 187, 347–65, 487, 490 Indira Gandhi Matritva Sahyog Yojana program, India 352 Indira Gandhi National Old-Age Pension Scheme, India 353 individual freedom 82 individual pension system, Turkey 320 individual retirement account, Mexico 125 Indonesia 19, 28, 33, 53, 158, 354–8, 365–82, 487 Indonesian national armed forces social insurance (ASABRI) 366, 368–70, 377 industrial accident compensation insurance (IACI), Korea 453 infant mortality rate 3, 28, 165–6, 182, 338, 351, 354, 357, 359, 408, 481 Instituciones de Salud Previsional (ISAPREs), Chile 141–2 Integrated Child Development Scheme (ICDS), India 350–1 Integrated Employment Assistance Program for Self-Reliance (IEAPS), Hong Kong 427 Iran 27, 59, 86 Israel 8–9, 22–3, 27, 33, 93, 332–46 Iversen, Torben  230 Ivory Coast 23 Jamaica 52, 164, 166, 172, 296–7 Japan 6–7, 11, 17, 21, 30, 53–7, 158, 165, 360, 383, 393, 408, 411, 451, 465, 469–86 Jawaharlal Nehru University 347 Job Network, Australia 79 Johnson, Chalmers 473 Johnson, Lyndon Baines 90 Jordan 58–9 Josephson, Bruce 4, 178–90 Justice and Development Party (AKP), Turkey 317, 324, 327–8 Kainu, Markus 8, 291–314 Katz, Michael B. 88–9 Kay, Stephen J. 148 Kazakhstan 22–3, 28, 296, 360, 487 Kersbergen, Kees van 16 Keyder, Cag˘ lar 318 Keynes, John Maynard 41 Keynesianism 43, 47, 49, 192, 216–17 Kigyochusinchugi, Japan 56

Kim, Jinsoo 11, 451–68 Kim,Young-Sam  11 Kivinen, Markku 8, 291–314 Korea 6, 10–11, 16, 21, 55–7, 93, 134–5, 158, 165, 360, 383–4, 433, 451–69 Korpi, Walter  5 Ku,Yeun-Wen 10, 433–50 Kuhnle, Stein 55 Kulmala, Meri 8, 291–314 Kuomintang (KMT), Taiwan 439 Kuwait 23, 27, 58–9 Kwon, Huck-Ju 56 Kyrgyzstan 53 labor market policies, Austria 263–4 labour insurance (LI), Taiwan 435–7 Ladies Benevolent Society, USA 89 Lagos, Ricardo 142–3 learnfare 6 Lebanon 58–9 Lee, Carmel K. M. 10, 398–418 Lee, Teng-Hui  10 Lee,Yi-Jiunn 10, 433–50 Leichsenring, Kai 7, 258–72 Leung, Joe C. B. 10, 419–32 Li, Shi 58 Liberal-National Party, Australia 75 Libya 58–9, 297 life expectancy 8, 28, 55, 109, 142, 145–7, 159, 165–6, 195, 206, 250, 262, 277, 291–2, 297–8, 300–2, 304–7, 313 Liu, Hubert 11, 469–86 Lobao, Linda M. 292 Lodge, Guy 49 long-term care insurance: Austria 258–9, 265–71; Germany 247–8; Japan 477–8 long-term care insurance (LTCI), Korea 453, 465 Low, Linda 389 Low-Income Working Family Allowance, Hong Kong 424 Lula da Sila, Luiz Inácio 157 Luxembourg 3, 26, 165, 297 Ma, Stephanie 102 Macao 297 Madunagu, Bene E. 185 Mahatma Gandhi National Rural Employment Guarantee Scheme, India 352 Malawi 186, 297 Malaysia 21, 55, 64, 158 Mali 23 Malloy, James M. 17, 454 malnutrition 65, 108, 122, 131, 357–9 Mandatory Provident Fund (MPF), Hong Kong 421, 428 “Many Helping Hands,” idea of, Singapore 387 Marchal, Sarah 49 495

Index

Marshall, Thomas Humphrey 192 Martínez, Gabriel 3–4, 122–37 Marx, Ive 49 Maternal and Child Care program, Nigeria 183 maternal mortality rate 107–9, 120, 165–6, 354, 357 maximum billing for medical costs, Belgium 231, 237–41 McClure, Patrick 80 Mead, Lawrence 78 measles 108, 356–7 Mechelen, Natascha Van 6, 49, 229–57 Medicaid, USA 94–5, 102, 104 Medical Financial Assistance, China 403 Medicare, USA 100, 104 Medvedev, Dmitry Anatolyevich 296, 308 Mendes, Philip 2, 71–86 mental health, UK 196–9 Mesa-Lago, Carmelo 3, 106–21, 139, 454 Mexico 3, 21, 26, 50–1, 53, 55, 62, 93, 122–37, 158, 165, 168–9, 172, 183, 196, 324–5 Mid-day Meal Program, India 26 Military Servicemen’s Insurance (MSI), Taiwan 438 Millennium Development Goals (MDGs) 45 Minimum Livelihood Guarantee (Dibao), China 403 minimum pension, Chile 147, 149–50 Mission Australia 76, 80 Moffitt, Robert A. 98 Mokomane, Zitha 60 Moldova 297 Morocco 58–9 Moynihan, Daniel Patrick 97 Mozambique 23, 186, 353–9 Muramatsu, Naoko 478 Muslim Brotherhood 58 Myanmar 354–8, 360 Namibia 23 Naskoshi, Gemati Ekacita 9, 365–82 National Chi Nan University, Taiwan 16 National Committee to Combat Poverty, Israel 336, 343 National Food Security Act, India 353 national health insurance, Israel 338 National Health Insurance (NHI): Korea 453, 464; Taiwan 439, 441–4 National Health Insurance Scheme, Nigeria 182 National Health Service: Chile 140; UK 5, 25, 192–201 National Housing Fund, Mexico 125 National List of Essential Medicine, India 353 National Pension (NP), Korea 453, 464 National Pension Insurance (NPI), Taiwan 438 National Program for Nutritional Support for Primary Education, India 351 496

National Provident Fund, Nigeria 186 National Shelter, Australia 76 National Social Security Fund (NSSF), China 408 NDC (notional defined contribution) accounts, Sweden 209 needs-oriented minimum coverage, Austria 262–3 Nepal 354–8 Netherlands 16, 21, 158, 168, 266, 297 NETs (non-economically targeted social benefits and services) 4, 30, 169–73, 361, 481, 488 New Deal, US 89 New Gold Plan, Japan 477 Newman, Jocelyn 77 new pension system, India 350 Newstart Allowance, Australia 72, 74, 77, 80 New Zealand (Aotearoa) 21, 25, 31, 53, 158, 165, 411 Ng, Kok Hoe 389 Nicaragua 50, 52, 166, 168, 172, 297 Nigeria 4, 178–90, 296, 353–9 Nikula, Jouko 8, 291–314 Niño-Sarazúa, Miguel 60 Nixon, Richard Milhous 91 normative theory 7 North American Free Trade Agreement (NAFTA) 134 Northern Territory Emergency Response, Australia 78 Norway 3, 5, 21, 24, 158, 165, 168, 296–7, 325, 408 Obama, Barack Hussein 118 Obamacare see Patient Protection and Affordable Care Act O’Connor, Alice 89, 91 Okpukpara, Chiedozie Benjamin 184 Old-Age and Survivors Insurance, USA 99 Old-Age Living Allowance, Hong Kong 423–4 Oman 23, 27, 58–9 OMC (Open Method of Coordination) 489 One-Child Policy, China 406, 411, 413, 416 Oportunidades, Mexico 122–35 Orloff, Ann Shola 92–3 Osakue, Grace 185 Pakistan 53, 354–8 Palier, Bruno 5, 216–28 Palme, Joakim 5, 203–15 Panama 50–1, 166 Paraguay 50, 52, 62, 166 Parenting Payment, Australia 75, 77, 80 Partnership Fund for the Disadvantaged, Hong Kong 428 Patient Protection and Affordable Care Act (Obamacare), USA 25, 92, 102, 104 Peng, Ito 473 Pensiones para el Adulto Mayor, Mexico 125

Index

pension fund/savings accounts, Taiwan 439–40 pension system: Austria 261–2; Japan 477; Switzerland 276–8 Peru 50–1, 53, 158, 166 Philippines 55, 64, 297, 336, 354–7, 360 Phillipson, Chris 193, 195 Pierson, Christopher 61 Pilot Scheme on Community Care Service Voucher for the Elder Persons, Hong Kong 426 Piñera, José 146 Pinochet, Augusto 138–41, 146, 152 PISA study 283, 325 Plan d’Action pour le Retour à l’Emploi (PARE), France 220 Plan de Acceso Universal con Garantías Explícitas (AUGE), Chile 143–6 Poland 17, 21, 93, 158, 165, 296–7 political will 32 Portugal 21, 46, 158, 165, 297 poverty trap 3–4, 10, 30, 167, 169–70, 173, 219, 488 Powell, Jason L. 5, 191–202 Prasad, Naren 59 President’s Instruction on Left-Behind Villages, Indonesia 368 Previdência Complementar Fechada, Brazil 159 Previdência Privada Complementar, Brazil 159 Previdência Social Rural, Brazil 159 Progresa, Mexico 122–35 Prospera, Mexico 122–35 Prosperous Family Development Program, Indonesia 368 Public Distribution System (PDS), India 26, 351, 360 public pension scheme, Germany 246–7 Putin,Vladimir Vladimirovich 8, 294–6, 308–9 Qatar 23, 27, 58–9 quasi means tests 4 Rashtriya Swasthya Bima Yojna program (RSBY), India 352–3 real-typical method 2, 7–8, 10, 15, 17–19, 24–5, 88, 155, 254, 469–70 redistribution paradox 5, 204 Regime Gerald de Previdência Social, Brazil 158 Regime Próprio da Previdência Social, Brazil 158–9 Remington, Thomas  313 Renta Dignidad, Bolivia 52 Revenu Minimum d’Insertion, France 218 Riester pension plan 252–3 Right to Food Act, India 359 Roadmap on the Implementation of Social Security for Workers, Indonesia 381 Roberts, Kenneth 50 Romania 48

Roosevelt, Franklin Delano 90 Rousseff, Dilma Vana 157 Rural Cooperative Medical System, China 409 Russian Federation 8, 17, 19, 22–3, 27–8, 33, 64–5, 291–316, 489 Rwanda 23 Salvation Army, Australia 76 Saudi Arabia 23, 27, 58–9 saving people’s lives 29 savings trap 3–4, 6, 10, 30, 167, 169–70, 173, 488 school food programs, USA 98 Schultz, T. P.  131 Second Sino-Japanese War 471 Seeleib-Kaiser, Martin 253 Seguro Popular, Mexico 126–7 Senegal 23 Seoul National University, Korea 17 Serbia 297 Sinanoglu, Semuhi 58–9 Singapore 9, 21, 24, 30–1, 55, 57, 64, 158–9, 165, 297, 383–97, 474, 478–9, 481–2, 487–8 Singer, H. W. 453 Sistema de Perfeccionamiento Empresarial, Cuba 113 Skocpol, Theda  92 Slovakia 268, 297, 326 smarter welfare state 272 Smeeding, Timothy  94 Smith Family, Australia 76 social exclusion 1, 5, 27, 29, 197, 201, 225, 241, 263, 271, 318, 340, 392, 463, 488 social health insurance system, Belgium 235–41 social inclusion 8, 30, 48, 59, 79, 201, 241, 392–3, 332–43, 383, 388; Israel 340–2 Social Insurance for Private Sector Workers (  JAMSOSTEK), Indonesia 366, 368–9, 378–9 social insurance law, China 401 social policy marketing 29–30, 360 social safety net program (  JPS), Indonesia 367, 369 Social Security Allowance Scheme (SSAS), Hong Kong 421–2 Social Security Disability Insurance, USA 100 social tax expenditures, Australia 75 societal human capital/capabilities 29 solid fuels for cooking 355, 357–8, 410 Somalia 297 South Africa 60, 64–5 Spain 21, 46–7, 158, 165, 168, 234, 296–7 Special Market Operation program (OPK), Indonesia 369 Sri Lanka 9, 23, 26, 28, 296, 354–8, 360–1, 487 standard employment relationship 245 Starodubtsev, Andrej 309 statutory health insurance scheme, Germany 247 Storm-Petersen, Robert 41 stratification 87 497

Index

subsidized housing 96 Sudan 58, 297 Sukarnoputri, Megawati 365 Supplemental Nutrition Assistance Program 96–7 Supplemental Nutrition Program for Women, Infants, and Children, USA 99 Supplemental Security Income, USA 95 supplementary contribution, Chile 150 Suriname 166, 297 Swaziland 297 Sweden 5, 21, 24, 30–1, 158, 165, 168, 203–15, 234, 266, 297, 405, 452, 472, 479, 487–8 Switzerland 6–8, 21, 26, 158, 274–90, 479 Syria 58–9 System Jaminan Sosial Nasional (SJSN), Indonesia 9, 365–6, 369, 379–80 Taiwan 10–11, 16, 21, 55–7, 158, 383, 433–50, 469, 487 Targeted Public Distribution System (TPDS), India 351 targeting within universalism 229, 237–41 Taylor, Paul 5, 191–202 Taylor-Gooby, Peter 48 Temporary Assistance to Needy Families (TANF), USA 91, 97–8, 103 Teo,Youyenn 9, 383–97 Thailand 21, 28, 55, 158, 172, 297, 354–7, 361, 487 Thatcher, Margaret Hilda 195–6, 197 Thatcherism 191, 193, 195 Therborn, Göran 48, 64, 65 Three Nos Scheme, China 404, 412 Timor Leste see East Timor Titmuss, Richard Morris 62, 95 Tocqueville, Alexis de 92, 94 Top-Up Grant, Singapore 390 Trentes Glorieuses 230 Trinidad and Tobago 166 Truman, Harry 98 Tšernova, Žanna 310 Tulane University 53 Tunisia 58–9 Turkey 8, 59, 66, 93, 317–31 Uganda 183, 186 Ukraine 297 unconditional cash transfers (UCTs) 367 unemployment insurance, USA 101–2 unemployment insurance (UI), Korea 465 United Arab Emirates 23, 27, 58–9, 296 United Kingdom 5, 21, 25, 30, 43, 48, 95, 191–202, 244, 310, 386, 451, 476, 480 United States of America 3, 5–6, 8, 21–2, 25, 28, 30–1, 41, 49, 61, 87–105, 135, 141, 166, 168,

498

185, 211, 255, 288, 325, 340, 365, 386, 405, 451–2, 476, 487–9 Uniting Care, Australia 76 Universal Basic Education program, Nigeria 184 universal benefits and services (UBS) 4, 30, 481, 488 universal primary education, India 26 upskilling 6 Urban Employees Basic Medical Insurance (UE-BMI), China 402–3 Urban Enterprise Pension Scheme (UEPS), China 401–2, 407 Urban Residents Basic Medical Insurance (UR-BMI), China 402 Uruguay 21, 26, 50–1, 53, 62, 113, 158, 164–5, 168, 297 USSR 106–7, 120 Uzbekistan 54 Venezuela 50, 108, 117–18, 139, 164, 166 Vietnam 354–7 Vivekanandan, B. 347 Voting Rights Act, USA 90 Wahab, Elias Olukorede 186 Wahid, Abdurrahman 365–6 Walker, Alan C. 195 war on poverty, USA 91, 96 Washington Consensus 45 Weber, Max 2, 16, 474 welfare society, idea of, Japan 469 welfare-to-work program, Israel 338 welfare without work syndrome 245 Wesley Mission, Australia 76 Widodo, Joko 365 Wiggan, Jay 199 Wilding, Paul 17 Wilensky, Harold L. 93 Wilson, Harold 193 workers’ compensation, USA 101 Workfare Income Supplement (WIS), Singapore 387 Work for the Dole scheme, Australia 78, 80 Work Incentive Transport Subsidy Scheme, Hong Kong 425 World War II 56, 87, 191, 204, 230, 258, 451, 471 Wren, Anne 230 Yang, Sui 58 Yeltsin, Boris Nikolayevich 8, 292–3, 308 Yemen 58–9 Young, Jock 194 Yudhoyono, Susilo Bambang 365 Zimbabwe 297