Skip to main content
SpringerLink
Log in

Social investment: A guiding principle for welfare state adjustment after the crisis?

  • Original Paper
  • Published:
Empirica Aims and scope Submit manuscript

Abstract

The European welfare states have undergone a significant amount of change over the last decades. In light of the unresolved tensions resulting from changed macroeconomic conditions, the emergence of new social risks as well as from the consequences of the Great Recession and its aftershocks, more adjustments are needed. The present paper investigates the current outlook on welfare state change, retracing its socio-economic drivers and the salient steps that were undertaken to reform welfare states in the last decades. Since the outbreak of the crisis, calls to adopt a social investment perspective on welfare state reform intensified, both in the academic field and at the EU policy-level. Ample space is therefore devoted to the discussion of this perspective, its conceptual basis, and implementation. For a number of reasons, social investment seems the most appropriate approach to frame the objectives that contemporary welfare states have to pursue and to devise a consistent set of policies. The objections which have been moved against the social investment perspective have however to be taken seriously. Moreover, current developments indicate diverging trends across EU Member States, with lack of progress in those countries which are most in need of a social investment strategy. To become an effective policy paradigm, the social investment perspective thus needs a stronger anchoring within the EU architecture and more co-ordinated commitment from Member States.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Source: EUROSTAT

Fig. 2
Fig. 3

Source: Author’s calculations based on Disability policy typology country scores, OECD (2003, 2010). The scores measure the extent of change in disability policy with a typology based on two qualitative policy indicators, each of them consisting of ten sub-components. The first indicator provides an overall assessment of policy features related to the benefit system and the second captures the intensity of integration measures for benefit recipients and those applying for benefits

Fig. 4
Fig. 5

Source: Adapted from Kvist (2014)

Fig. 6

Source: Böheim and Leoni (2016)

Similar content being viewed by others

Notes

  1. The notion of social citizenship goes back to the highly influential work of Marshall (1964). Many scholars have stressed the link between the notion of social citizenship and the concept of decommodification, i.e. the degree to which welfare states enable citizens to uphold a socially acceptable standard of living independent of market participation (Esping-Andersen 1990). The question of the extent to which social rights include not only benefits that are universal and independent from employment, but also measures that are contingent on market participation (and thus assumptions about rights and duties) is a matter of debate (see Stephens 2010; Jenson 2012).

  2. For evidence of the empirical validity of “power resource theory”, see for instance Bradley et al. (2003). The power resource theory was developed by Korpi (1983), a good description can be found in Häusermann et al. (2013).

  3. Calculated as the ratio between the total inactive population and employment, it gives a measure of the average number of individuals that each employed person “supports”.

  4. “Modern technology often leads to winner-take-all outcomes, and the inequality implications in terms of income—though not in terms of access to the good itself—are worrisome. What we gain as consumers, citizens, viewers and patients we may lose as workers” (Mokyr 2014; p. 88).

  5. As an interesting side point, Bowles (2014) finds significant cross-country variation in the risks of computerisation for jobs within the EU. In the aggregate the share of jobs with a high risk of computerisation is similar in Europe and in the US (50 and 47 % respectively). In a picture disaggregated by country, however, Northern countries—Netherlands, Belgium, Germany, France, the UK, Ireland, and Sweden—have considerably lower computerisation risk levels than the Southern and Eastern Member States of the EU.

  6. In addition to the assumptions that underpin the identification of computerisation risks of specific jobs, the authors point out that their analysis is static in nature, i.e. it is based on a snapshot of the current distribution of jobs in the economy and does not take into account dynamic shifts in their composition over time.

  7. Secular stagnation can be defined as “a situation when policy interest rates bounded at zero fail to stimulate demand sufficiently due to low or negative neutral real interest rates and low inflation, and when ensuing prolonged and subdued growth undermines potential growth via labour hysteresis and discouraged investment” (Rawdanowicz et al. 2014).

  8. These scarring effects can be a consequence of human capital depreciation, foregone human capital accumulation and negative signalling effects of unemployment (Cockx and Picchio 2013).

  9. Pierson (1994) first conceptualised the quantitative dimension of welfare change as “retrenchment”, i.e. as policy changes “that either cut social expenditure, restructure welfare state programs to conform more closely to the residual welfare state model, or alter the political environment in ways that enhance the probability of such outcomes in the future” (p. 17).

  10. Recent evidence on the role played by reciprocity for welfare state support is provided, among others, by León (2012).

  11. For a concise review of this literature, see Schmitt and Starke (2011).

  12. i.e. a reduction in the variance or distribution of the investigated indicators, without taking into account initial levels or controlling for independent variables known to be associated with the phenomenon in question.

  13. Nolan (2013) argues that “the conceptual distinction [between social investment and other social spending] is problematic both in theory and application” (p. 467). The distinction between investment and consumption, and capacitating and protective social spending is in fact not dichotomous. No form of social spending is purely an investment without an element of current consumption, and vice versa. This raises methodological questions with respect to the measurement of social investment and calls for a careful use of the social investment notion, particularly in attempts to quantify the investment component of social policies and to classify expenditure categories accordingly.

  14. “The life course framework allows us, first, to connect fragments because welfare conditions at one stage of the life cycle are often directly linked to events earlier in life (and may influence well-being later on in life). […] Second, as discussed above, it is only via a life course perspective that we can adequately separate momentary (and possibly inconsequential) from lasting hardship. And, third, this is a methodology which does help us take a peek into the dim future. If we know a lot about today’s youth cohorts we are in a fairly good position to make informed forecasts about tomorrow’s parents, workers, or welfare clienteles” (Esping-Andersen et al. 2002).

  15. Young people who are not employed and not in any education or training (NEET).

References

  • Arulampalam W (2001) Is unemployment really scarring? Effects of unemployment experiences on wages. Econ J 111(475):585–606

    Article  Google Scholar 

  • Atkinson AB, Piketty T, Saez E (2011) Top incomes in the long run of history. J Econ Lit 49(1):3–71

    Article  Google Scholar 

  • Autor DH, Katz LF, Kearney MS (2008) Trends in U.S. wage inequality: revising the revisionists. Rev Econ Stat 90(2):300–323

    Article  Google Scholar 

  • Barbier JC (2012) Social investment, a problematic concept with an ambiguous past: a comment on Anton Hemerijck. Sociologica 1:1–11

    Google Scholar 

  • Barbier JC, Ludwig-Mayerhofer W (2004) The many worlds of activation. Introduction to the special issue of European Societies. Eur Soc 6(4):423–436

    Article  Google Scholar 

  • Barr N (2001) The welfare state as piggy bank. Information, risk, uncertainty and the role of the state. University Press, Oxford

    Book  Google Scholar 

  • Beblavý M, Maselli I, Veselková M (2014) Let’s get to work! The future of labour in Europe. CEPS, Brussels

    Google Scholar 

  • Begg I (2013) What does the crisis change? Report from a neujobs brainstorming seminar. Neujobs Policy Br 12(2):1–10

    Google Scholar 

  • Böheim R, Leoni T (2016) Disability policies: reform strategies in a comparative perspective, NBER working papers, 22206. The National Bureau of Economic Research

  • Bonoli G (2006) New social risks and the politics of post-industrial social policies. In: Armingeon K, Bonoli G (eds) The politics of post-industrial welfare states. Routledge, London, pp 3–26

    Google Scholar 

  • Bonoli G (2007) Time matters. Postindustrialization, new social risks, and welfare state adaptation in advanced industrial democracies. Comp Polit Stud 40(5):495–520

    Article  Google Scholar 

  • Bonoli G (2012) Active labour market policy and social investment: a changing relationship. In: Nathalie M, Bruno P, Palme J (eds) Towards a social investment welfare state? Ideas, policies and challenges. Policy Press, Chicago, pp 181–204

    Google Scholar 

  • Bonoli G, Natali D (2012) The politics of the ‘new’ welfare state. Analysing reforms. In: Bonoli G, Natali D (eds) The politics of the new welfare state. University Press, Oxford, pp 287–306

    Chapter  Google Scholar 

  • Bouget D, Frazer H, Marlier E, Sabato S, Vanhercke B (2015a) Social investment in Europe. A study of national policies. European Commission, Brussels

    Google Scholar 

  • Bouget D, Frazer H, Marlier E, Peña-Casas R, Vanhercke B (2015b) Integrated support for the long-term unemployed. A study of national policies. European Commission, Brussels

    Google Scholar 

  • Bowles J (2014) The computerisation of European jobs—who will win and who will lose from the impact of new technology onto old areas of employment? Bruegel. Accessed 20 Sep 2014. http://www.bruegel.org/nc/blog/detail/article/1394-the-computerisation-of-eu-ropean-jobs/

  • Bradley D, Huber E, Moller S, Nielsen F, Stephens JD (2003) Distribution and redistribution in postindustrial democracies. World Polit 55(2):193–228

    Article  Google Scholar 

  • Brandt M, Deindl C, Hank K (2012) Tracing the origins of successful aging: the role of childhood conditions and social inequality in explaining later life health. Soc Sci Mag 74(9):1418–1425

    Article  Google Scholar 

  • Cantillon B (2011) The paradox of the social investment state: growth, employment and poverty in the Lisbon. J Eur Soc Policy 21:432

    Article  Google Scholar 

  • Cantillon B, Van Mechelen N (2013) Poverty reduction and social security: cracks in a policy paradigm, working paper 13(4). Herman Deleeck Centre for Social Policy, Antwerp

  • Cantillon B, Van Mechelen N, Pintelon O, Van den Heede A (2013) Why has social security become less pro poor? ImPRovE discussion paper, 13(5). Herman Deleeck Centre for Social Policy, Antwerp

  • Cockx B, Picchio M (2013) Scarring effects of remaining unemployed for long-term unemployed school-leavers. J Roy Stat Soc 176(4):951–980

    Article  Google Scholar 

  • de la Porte C, Jacobson K (2012) Social investment or recommodification? Assessing the employment policies of the EU Member States. In: Morel N, Palier B, Palme J (eds) Towards a social investment welfare state? Ideas, policies and challenges. Policypress, Chicago, pp 117–149

    Google Scholar 

  • DeLong BJ, Summers LH (2012) Fiscal policy in a depressed economy, Brookings papers on economic activity. The Brookings Institution

  • Ebbinghaus B (2012) Europe’s transformations towards a renewed pension system. In: Natali D (ed) Bonoli G. The politics of the New Welfare State, Oxford, pp 182–205

    Google Scholar 

  • Esping-Andersen G (1990) The Three Worlds of Welfare Capitalism. Princeton University Press, New York

    Google Scholar 

  • Esping-Andersen G (1996) After the golden age? Welfare state dilemmas in a global economy. In: Esping-Andersen G (ed) Welfare states in transition. National adaptations in global economies. Sage, London, pp 1–31

    Chapter  Google Scholar 

  • Esping-Andersen G, Gallie D, Hemerijck A, Myles J (eds) (2002) Why we need a new welfare state. University Press, Oxford

    Google Scholar 

  • ETUI (European Trade Union Institute) (2015) Benchmarking working Europe 2015, Brussels

  • European Commission (2013a) Towards social investment for growth and cohesion. Commission Communication, 83, 20 Feb 2013

  • European Commission (2013b) Strengthening the social dimension of the economic and monetary union. Commission Communication, 690, 2 Oct 2013

  • European Commission (2015) The 2015 ageing report. Economic and budgetary projections for the 28 EU Member States (2013–2060), European Economy 3/2015, Luxembourg

  • European Parliament (2012) Social investment pact—a response to the crisis, Resolution 2012/2003(INI), 20 Nov

  • Evenett SJ (2014) The global trade disorder, The 16th GTA report. Centre for Economic Policy Research Press, London. http://www.globaltradealert.org/sites/default/files/GTA16-_0.pdf

  • Fischer-Kowalski M, Haas W, Wiedenhofer D, Weisz U, Pallua I, Possanner N, Behrens A, Serio G, Alessi M, Weis E (2012) Socio-ecological transitions: definition, dynamics and related global scenarios. Institute of Social Ecology (AAU), Brussels

    Google Scholar 

  • Frey CB, Osborne MA (2013) The future of employment: how susceptible are jobs to computerisation. OMS working paper. University Press, Oxford

  • Giddens A (1998) The third way: the renewal of social democracy. Policy Press, Cambridge

    Google Scholar 

  • Goldin CD, Katz LF (2009) The race between education and technology. University Press, Harvard

    Google Scholar 

  • Gordon RJ (2014) The demise of US economic growth: restatement, rebuttal, and reflections, NBER working paper. 19895, The National Bureau of Economic Research

  • Gregg P, Tominey E (2005) The wage scar from male youth unemployment. Labour Econ 12(4):487–509

    Article  Google Scholar 

  • Hacker JS (2004) Privatizing risk without privatizing the welfare state: the hidden politics of social policy retrenchment in the United States. Am Polit Sci Rev 98(2):243–260

    Article  Google Scholar 

  • Häusermann S, Picot G, Geering D (2013) Review article: rethinking party politics and the welfare state-recent advances in the literature. Br J Polit Sci 43(1):221–240

    Article  Google Scholar 

  • Hayward MD, Gorman BK (2004) The long arm of childhood: the influence of early-life social conditions on men’s mortality. Demography 41(1):87–107

    Article  Google Scholar 

  • Hemerijck A (2012) Two or three waves of welfare state transformation? In: Morel N, Palier B, Palme J (eds) Towards a social investment welfare state? Ideas, policies and challenges. Policy Press, Chicago, pp 33–60

    Google Scholar 

  • Hemerijck Anton (2013) Changing welfare states. University Press, Oxford

    Google Scholar 

  • Hemerijck A (2014) Changing welfare states. Public Adm 92(1):252–253

    Article  Google Scholar 

  • Hemerijck A, Dräbing V, Vis B, Nelson M, Soentken M (2013) European welfare states in motion. Neujobs working paper 5(2)

  • Huber E, Stephens JD (2006) Combating old and new social risks. In: Armingeon K, Bonoli G (eds.) The politics of post-industrial welfare states, London-New York, pp 143–168

  • Jenson J (2010) Diffusing ideas for after neoliberalism the social investment perspective in Europe and Latin America. Global Soc Pol 10(1):59–84

    Article  Google Scholar 

  • Jenson J (2012) A new politics for the social investment perspective. In: Bonoli G, Natali D (eds) The politics of the new welfare state. University Press, Oxford, pp 21–44

    Google Scholar 

  • Kenworthy L (2010) Labour market activation. In: Castles FG, Leibfried S, Lewis J, Pierson C (eds) The Oxford handbook of the welfare state. University Press, Oxford, pp 435–447

    Google Scholar 

  • Korpi W (1983) The democratic class struggle. Routledge, London

    Google Scholar 

  • Kuitto K (2014) Trends of social investment and compensating welfare policies in Europe: a life course perspective. Greifswald Comparative Politics working paper 8/2014

  • Kvist J (2013) The post-crisis European social model: developing or dismantling social investments? J Int Comp Soc Policy 29(1):91–107

    Article  Google Scholar 

  • Kvist J (2014) A framework for social investment strategies: integrating generational, life course and gender perspectives in the EU social investment strategy. Comp Eur Polit 14:1–19

    Google Scholar 

  • León FJ (2012) Reciprocity and public support for the redistributive role of the state. J Eur Soc Pol 22(2):198–215

    Article  Google Scholar 

  • Lundvall BǺ, Lorenz E (2012) From the Lisbon Strategy to Europe 2020. In: Morel N, Palier B, Palme J (eds) Towards a social investment welfare state? Ideas, policies and challenges. Policy Press, Chicago, pp 333–351

    Google Scholar 

  • Marshall TH (1964) Class, Citizenship and Social Development. Doubleday, Garden City, NY

  • Mokyr J (2014) Secular stagnation? Not in your life. In: Teulings C, Baldwin R (eds) Secular stagnation: facts, causes and cures. Centre for Economic Policy Research Press, London, pp 83–89

    Google Scholar 

  • Morel N, Palier B, Palme J (2012) Beyond the welfare state as we knew it? In: Morel N, Palier B, Palme J (eds) Towards a social investment welfare state? Ideas, policies and challenges. Policy Press, Chicago, pp 1–30

    Google Scholar 

  • Nikolai R (2012) Towards social investment? Patterns of public policy in the OECD world. In: Morel N, Palier B, Palme J (eds) Towards a social investment welfare state? Ideas, policies and challenges. Policy Press, Chicago, pp 91–115

    Google Scholar 

  • Nolan B (2013) What use is ‘social investment’? J Eur Soc Pol 23(5):459–468

    Article  Google Scholar 

  • OECD (2003) Transforming disability into ability, policies to promote work and income security for disabled people. Organization for Economic Cooperation and Development, Paris

    Google Scholar 

  • OECD (2009) Growing unequal? Income distribution and poverty in OECD countries. Organization for Economic Cooperation and Development, Paris

    Google Scholar 

  • OECD (2010) Sickness, disability and work: breaking the barriers. A synthesis of findings across OECD countries. Organization for Economic Cooperation and Development, Paris

    Google Scholar 

  • OECD (2014a) Focus on top incomes and taxation in OECD countries: was the crisis a game changer?. Directorate for Employment, Labour and Social Affairs, Paris

    Google Scholar 

  • OECD (2014b) “Growth prospects and fiscal requirements over the long term”, in chapter 4 of OECD economic outlook. Organization for Economic Cooperation and Development, Paris

    Google Scholar 

  • OECD (2015) In it together: why less inequality benefits all. OECD Publishing, Paris

    Google Scholar 

  • Pierson P (1994) Dismantling the welfare state? Reagan, thatcher and the politics of retrenchment. Cambridge University Press, Cambridge

    Book  Google Scholar 

  • Pierson P (2002) Coping with permanent austerity: welfare state restructuring in affluent democracies. Revue française de sociologie 43(2):369–406

    Article  Google Scholar 

  • Pierson P (2011) The welfare state over the very long run. Centre for Social Policy Research (ZeS) working paper. 2, University of Bremen, Bremen

  • Piketty T (2013) Capital in the twenty-first century. Harvard University Press, Cambridge

    Google Scholar 

  • Piketty T, Saez E, Zucman G (2013) Rethinking capital and wealth taxation. mimeo, 2013

  • Pintelon O, Cantillon B, Van den Bosch K, Whelan CT (2011) The social stratification of social risks: class and responsibility in the “New” Welfare State. GINI discussion papers, 13. AIAS, Amsterdam

  • Rawdanowicz Ł, Bouis R, Inaba KI, Christensen AK (2014) Secular stagnation: evidence and implications for economic policy. OECD economics department working papers, 1169(65), Paris

  • Rodrik D (2011) The globalization paradox. Why global markets, states, and democracy can’t coexist. University Press, Oxford

    Google Scholar 

  • Schafer MH, Ferraro KF, Mustillo SA (2011) Children of misfortune: early adversity and cumulative inequality in perceived life trajectories. Am J Sociol 116(4):1053–1091

    Article  Google Scholar 

  • Schmid G (2004) Soziales Risikomanagement durch Übergangsarbeitsmärkte, Wissenschaftszentrum Berlin für Sozialforschung (WZB), Abteilung Arbeitsmarktpolitik und Beschäftigung. WZB discussion papers, Berlin

  • Scruggs L (2014) Social welfare generosity scores in CWED 2: a methodological genealogy, CWED working paper, 1, University of Connecticut, Storrs

  • Scruggs L, Jahn D, Kuitto K (2014) Comparative welfare entitlements data set 2, 3. http://cwed2.org/

  • Schmitt C, Starke P (2011) Explaining convergence of OECD welfare states: a conditional approach. J Eur Soc Policy 21(2):120–135

    Article  Google Scholar 

  • Starke P (2006) The politics of welfare state retrenchment: a literature review. Soc Pol Adm 40(1):104–120

    Article  Google Scholar 

  • Starke P, Obinger H, Castles FG (2008) Convergence towards where: in what ways, if any, are welfare states becoming more similar? J Eur Public Policy 15(7):975–1000

    Article  Google Scholar 

  • Starke P, Kaasch A, van Hooren F (eds) (2013) The Welfare State as Crisis Manager. Palgrave Macmillan, London

    Google Scholar 

  • Stephens JD (2010) The Social Rights of Citizenship. In: Castles FG, Leibfried S, Lewis J, Pierson C (eds) The Oxford Handbook of the Welfare State. Oxford University Press, Oxford, pp 511–525

    Google Scholar 

  • Taylor-Gooby P (2002) The silver age of the welfare state: perspectives on resilience. J Soc Policy 31(4):597–621

    Article  Google Scholar 

  • Taylor-Gooby P (ed) (2004) New risks, new welfare: the transformation of the European welfare state. University Press, Oxford

    Google Scholar 

  • Teulings C, Baldwin R (eds) (2014) Secular stagnation: facts, causes and cures, a VoxEU.org. eBook. Centre for Economic Policy Research Press, London

    Google Scholar 

  • Tubeuf S, Jusot F, Bricard D (2012) Mediating role of education and lifestyles in the relationship between early-life conditions and health: evidence from the 1958 British Cohort. Health Econ 21(1):129–150

    Article  Google Scholar 

  • Vandenbroucke F, Rinaldi, D (2015) Social inequalities in Europe - The challenge of convergence and cohesion. In: Barié K, Thode E, Bartels S (eds) Redesigning European welfare states - Ways forward. Vision Europe Summit, Gütersloh, pp 38–77

    Google Scholar 

  • Vandenbroucke F, Vleminckx K (2011) Disappointing poverty trends: is the social investment state to blame? J Eur Soc Policy 21(5):450–471

    Article  Google Scholar 

  • Vis B (2010) Politics of risk-taking: welfare state reform in advanced democracies. University Press, Amsterdam

    Book  Google Scholar 

  • Whelan C, Maitre B (2010) Welfare regime and social class variation in poverty and economic vulnerability in Europe: an analysis of EU-SILC. J Eur Soc Policy 20(4):316–332

    Article  Google Scholar 

Download references

Acknowledgments

This research has received funding from the European Community’s Seventh Framework Programme FP7/2007–2013 under Grant agreement no. 290647. The author is grateful to a referee for insightful comments and suggestions as well as to Romke Van der Veen, Rainer Eppel, Christoph Lorenz and participants of the Euroframe conference in Vienna and the RE-InVEST seminar in Salzburg for their inputs on earlier versions of this paper. All remaining errors are the responsibility of the author.

Author information

Authors and Affiliations

  1. Austrian Institute of Economic Research (WIFO), Arsenal Objekt 20, 1030, Vienna, Austria

    Thomas Leoni

Authors
  1. Thomas Leoni
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Thomas Leoni.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Leoni, T. Social investment: A guiding principle for welfare state adjustment after the crisis?. Empirica 43, 831–858 (2016). https://doi.org/10.1007/s10663-016-9348-0

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10663-016-9348-0

Keywords

JEL Classification

Search

Navigation