Diversity of Welfare Systems in the EU: A Challenge to Policy Coordination

Abstract

As the EU economies and societies become increasingly integrated, and as labour market behaviour patterns converge across borders, the EU is striving to develop a substantially common social identity. To this end, it is seeking to promote the development of a sustainable institutional framework that facilitates flexibility and structural change in the economy and the labour market, and, at the same time, to provide a meaningful social safety net (‘flexicurity’). However, while there are such great differences in social organisation among EU countries, it would be unrealistic to try to establish a common social protection model. The more immediate goals for the EU should be to identify a mechanism for ensuring social protection, the developments that jeopardise the continuation of universal coverage for all members of society, the factors that are responsible for the exclusion of certain groups of people and how this is affected by different models of social organisation and, last but not least, the gaps are in the statistical data that prevent a proper evaluation of economic well-being under different welfare models. These are the questions that are addressed in this paper.

The argument advanced in this paper is that the well-being of every society depends upon the interaction of the market, the household/family and the state. The exclusion of the household sector from the conventional statistical framework – and its exclusion from orthodox economic theory – ignores the fact that the various models of social organisation give different relative weights to – and impose different roles on – the three pillars of social organisation. A different set of taxes, transfer payments and public services in the various welfare models that are found in the EU leads to a divergence of incentives to the private sector and/or the household to provide social services. This results in a different degree of integration of the working age population into the labour force, the quality of work and the price and quality of social protection. Models that allow for the targeting of individual needs are best able to cope with the current trends of increasing flexibility of work and family relationships and the concomitant challenge of universal social protection.