Nordic Welfare:A DIY Guide

Jon KvistCentre for Welfare State ResearchUniversity of Southern Denmark

Denmark – the land offairytales and LEGO

High equalityBetween rich and poorBetween men and womenIncomesEmploymentEarningsSubjective measures

High employmentFor allParticularly for womenThe higher the skills, the higher the employment

High employment is important:-To increase welfare-To finance welfare

Without high employment, no “welfairytale” how to make the welfare model employment-friendly?

Question: The Welfare PuzzleLow wage inequalityHigh employment

Generous cash benefitsHigh taxes

Activation requirement polices moral hazardEncompassing labour, social, educational and health services

that helps to create, maintain and utilize human capital

Answer: Employment-friendly policies

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Nordic approach

• Goal is to maximise the realization of human capital for all

• Almost all public policies are directed towards increasing work

• Welfare model not only about securing a safety net or providing insurance and compensation, but also social investments

Social investments over the life course

Childhood Youth Working ageFertille Old

Social investments: Example of policies

Childhood Youth Working ageFertille Old

Early childhood education and care

Primary, secondary and tertiary education

Care for children and elderly, leave schemes

Life-long learning, ALMP

Home help, health care

Social investments: Returns

Childhood Youth Working agedFertile Old age

Rate of return

Cognitive skills

Competences and knowledge

Skills and taxes

Children

Less expenses

Social investments

Insurance

Safety

(Re)distribution

The Welfare Circus

Equity versus efficiency Standard focusNegative trade-off through distortions from redistributive policies

Scandinavian focus1.Insurance promotes

risk behaviour2.Human capital investments

increase qualifications3.Cash benefits are

automatic stabilizers •Moral hazard can be policed

Life satisfactionUK DK

Organisation of welfare services

Authority to taxLegislate on cash benefitsTertiary education

Authority to taxSocial services-Childcare-Elderly careEducationEmployment servicesSome health servicesIn part reimbursed in part by state for cash benefitsInter-municipal redistribution

No authority to taxHealth services

State Regions (5) Municipalities (98)

Active labour market policies

Duration of unemployment spell

Workfare intensity

Job searchContact to job exchange

Short programmesCouncilingJob search courses

Targetted programmes:TrainingEducation

Changing demographics• Changing household

composition• Ageing populations• More ethnic diverse

populations

• (Re)conciliation of work and family life

• Less people to care and finance more elderly

• Maintain solidarity

Challenges

GBR

DK

GBR DK

Trust in others

The way we combine Lego bricks constitute our welfare societies

Employment protection

Social security

Active labour market policies

Social services

…. AND THUS THEIR SOCIAL AND ECONOMIC SUSTAINABILITY

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Lego bricks in the Danish model

Employment protection legislation

Active labour market policy

Social security Social services

Lax Rights and duties Encompassing Accessible, good quality childcare

Contact and talks Generous for low income groups

Encompassing elderly care

Job subsidy

In-work training

Courses and education

Sanctions

In short• By whom, where and when you are born matters for

your life chances• No big trade-off between efficiency and equity• Social security provide redistribution and insurance• Activation polices moral hazard• The effects of active labour market policies depends

on; economic cycle; type of instrument and target group, program length, sequencing and timing; etc.

• Social investments crucial, especially in:– Knowledge based societies- People before they become adults- Kids with disadvantaged family backgrounds

Is the Nordic model sustainable?

• Maintain high employment rates• Avoid increase in long term unemployment

and marginalization• Not new challenges, but changing focus and

forms• Other forms of equality: gender, age, persons

with handicaps and illness, ethnicity, regional etc.

• Social investments more needed than ever

Crisis perspectives

Cohort effectsIntergenerational effectsEuropean polarizationLabour market polarization

Nordic model here to stay

Thanks for your attention

www.jonkvist.comGood luck with

the Scottish Model!