Current changes in the welfare model – marketization, workfare

Social care and the protection provided by the state have faced considerable changes due to important transformations such as privatization and individualization. A common feature to all these changes lies on the creation of a new activating and 'enabling state' (Gilbert 2004) to replace the old system based on unconditional care and protection. The changes are often related to the spread of capitalism and the introduction of the global economy. For instance, at the European political level, these tendencies are concretized in the current Europe2020 initiative as aims for building a competitive and knowledge-based Europe by promoting smart, inclusive and sustainable growth.

The shift towards a more market – driven welfare model has been described as moving from a Fordist – Keynesian welfare state to a Schumpeterian workfare model associated with the neoliberal economic regime (Jessop 1994, 2002). The current model is then focused on enhancing structural competitiveness between national economies in the context of a world economy placing the emphasis on productivity and market innovation. By doing this, the social policy is subordinated to international competition and to the need to render labor more flexible. Hence, this welfare model attempts to extend economic logic to social policies by promoting flexibility of the labor supply and lowering public expenditure (Heikkilä 1999, Kosonen 1998, Van Berkel and Valkenburg 2007).

These developments are linked to the creation of quasi-markets in the provision of social services whereby the state is replaced by independent service providers, a development that introduces competition between the welfare customers. However, the difference from actual markets is that the providers are not necessarily private and the state still remains in the process of financing the services (van Berkel and Ehler 2012).

Furthermore, a shift from the welfare state towards a workfare state is being observed (see e.g. Kosonen 1998). Workfare refers to the trend initiated in the US within social assistance programs, adopted in European welfare discourses and commonly related to active labor market policies. The term 'workfare' is generally related to sanctioning procedures for work requirements and limitations for welfare benefits. In the Western European welfare system workfare targets the individuals in danger of social exclusion by enforcing active measures to replace the old, passive social policies (Handler 2005). Moreover, workfare mainly covers social assistance programs and contains a compulsory character due to the fact that non-compliance to the rules and work requirements contains a risk of being sanctioned. This becomes evident in cases where the economic necessities of certain individuals constrain their opportunities to oppose the offers given to them (Lødemel and Trickey 2000).

Hence, the third shift introduces a change from passive to active measures integrating the policy contextualization of welfare dependency and the socially excluded as a target group (Lødemel and Trickey 2000). These reforms are thus characterized by the shift of policy objectives from income protection to promoting participation in the labor market (van Berkel and Valkenburg 2007).

According to Handler (2003), the change towards an enabling state is rooted to an idea held by most of the political leaders of the welfare state as discouraging to the unemployed and a source of demotivation thus enabling the culture of welfare dependency. Thereby, an increase in unemployment is treated as the cause of the overly generous, passive policies encouraging the dependency of increasing number of beneficiaries. What follows is the need to promote employment in ways of making labor more active and flexible in the Western welfare context (Handler 2003). Giddens (1998, 2000) describes these developments as the shift of the welfare state into a new 'social investment state' whereby the labor is increasingly seen as an investment through human capital and education. The legitimization for the introduction and maintenance of such measures is based on the process of putting passive welfare entitlement of beneficiaries into question. This is followed by the questioning of public welfare expenditure by the tax-payers (Van Berkel and Hornemann Moller 2002).

Handler (2005) refers to a myth as a belief that the socially excluded will be empowered by workfare contract – based policies. The myth will be validated by the few for which the policies are successful but many will be further excluded.

2.1.1 Welfare models identified

The developments of the welfare state are not identical in all countries and welfare regimes. However, some similarities in welfare models can be made.

One of the most influential classifications has been done by Esping-Andersen (1990) who identified liberal, social democratic and conservative welfare regimes. These classifications signify 1) a minimalist model of welfare (e.g. USA and Australia), 2) a universalist democratic regime (Scandinavian countries) and a conservative 'corporatist' regime (e.g. France and Germany). When it comes to activation, along the lines of Esping-Andersen, some ideal types have been identified by other studies, many of which contrast 'liberal' to 'universalistic', 'generous', 'social-democratic', and 'social-activation' types of activation (Lødemel 2004).

According to Handler (2003), commonalities can be found between the US and the Western Europe welfare, as the 'work first' or 'job first' approach in both regions has some important similarities. Such workfare components refer to the discouragement of disabled and old workers to leave the labor force, placement of young workers in the labor market or activation measures and tightening work requirements for the unemployed. On the other hand, other writers outline the differences in the welfare regimes of the US and Western Europe. For instance, Dean (2003) separates 'work-first' from 'human capital' approaches, locating the former to the American welfare model and the latter to the Nordic and European continental countries. The differences are found in the high focus on labor market integration promoted by the work-first model with the attitude that any job is better than no job and the human capital focus in marketable skills and competences enabling attainment of a suitable job.

Other theories similar to these configurations outline the difference between 'negative' and 'positive' activation (Taylor-Gooby 2004) or 'liberal' versus 'universalistic' activation by Barbier and Ludwig-Mayerhofer (2004). Yet, as Giuliano Bonoli (2010) has stated, resorting to dichotomies risks being too simplistic way to scrutinize of policies. While welfare models need to take into

consideration factors such as interaction between the changing economic context and the labor-market policies, there are some important commonalities between the welfare states. One of these, as stated by Bonoli, is the overall development towards higher importance than before given to labor market integration promoted by ALMP's. Also Barbier (2010) refers to the welfare-to-work strategies, i.e. welfare processes aiming at labor market integration of the recipients more or less based on obligation as the mainstream meaning given to activation. By criticizing the mainstream understanding of activation as too narrow and in order to capture the wide array of reforms and measures that can be enclosed in the concept of activation, he suggests the notion of 'activation of social protection', which is to provide an 'introduction (or the re-activation/reinforcement) of an explicit linking between access to social protection and labor market participation' (p. 11). What becomes evident from the diverse theories on welfare reforms, activation policies and measures is the complexity of the issue due to variations in political and economic structures of the countries and regions. This is particularly the case when taking into consideration the historical and cultural developments of the welfare state leading to various combinations in the country level implementation of active labor market policies.

2.1.2 Active labor market policies – implementation and effects

The increase in unemployment rates amongst the youth was followed by a rise in welfare expenditure at the European scale and within the OECD countries. As stated earlier, the idea behind these changes was that the welfare state expenses were to support active integration. Thereby, social expenses should be made productive by inducing labor market integration of beneficiaries by the integration of contract based welfare measures aiming for mutual obligations (e.g. Van Berkel and Hornemann Møller 2002). High preference given to active policies can be seen in the increasing state expenditure on government policies promoting active measures. Within the OECD countries, during the time period from 1980's to early 2010, the average percentage of GDP invested in active measures has increased from 0,4 to 0,7 percent¹⁰.

Pioneered in Sweden and in the Nordic countries starting from the 1950's (Bonoli 2010), active labor market policies refer to government programs intervening in the labor market with the aim of helping the unemployed to find work. The main target group within most of the EU Member States is unemployed people registered in public employment services (PES). The primary means of activation are PES efforts in providing information on job vacancies and providing assistance in improving related skills in job seeking. In addition, these means include training schemes to improve the vocational skills of the unemployed and increasing their employability. Lastly, employment subsidies introduce a way to create jobs for the unemployed and to allow for working experiences by enabling incentives for organizations and companies for recruiting (Eichhorst et al. 2013). Handler (2005) lists the ALMPs in three

10 Labour market programmes: expenditure and participants, OECD Employment and Labour Market Statistics (database) http://www.oecd-ilibrary.org/employment/public-expenditure-on-active-labour-market-policies_20752342-table9

components: reversing policies encouraging exit from the labor force aimed at disabled and older workers; providing training and employment measures for individuals on the margins of the labor market, and finally, tightening work requirements for the unemployed as well as providing activation measures for social assistance beneficiaries. In addition to training schemes the intervention may also mean creating temporary jobs in public administration, providing employers with subsidies or measures encouraging self-employment to facilitate labor market integration (Bonvin 2008).

An increasing amount of economic research and literature has been devoted to the effects of participation in schemes provided by the ALMPs. This research has mainly focused on the compulsive effects of activation such as the threat and motivation effects, which describe the incentive for job search activities being increased by the risk of being activated or sanctioned. In Denmark, for instance, the research has confirmed that these risks significantly increase the job finding rate of men in particular (Rosholm and Svarer 2004). In addition, the Dutch case shows that the monitoring, counseling and sanctioning regime increases the likelihood of finding a job for the most disadvantaged (van den Berg and van den Klaauw 2006). In Switzerland, sanctioning is seen as effective in stimulating the unemployed to leave unemployment and in functioning as an incentive by the threat of being sanctioned. Time spent unemployed has also been shown to decrease by roughly three weeks for the sanctioned beneficiaries (Lalive et al. 2005). Yet, in the US, the threat of sanctions has been shown only to induce behavioral change in the context of informal work but not with formal work and to be ineffective in reducing welfare dependency (Lee et al. 2004).

On the other hand, high levels of welfare benefits have been shown to have a disincentivizing effect on job search intensity and contributing to longer unemployment levels. More recently, an extensive meta-analysis was carried out consisting of 137 program evaluations from 19 European countries (Kluve 2010) confirming a significant positive impact on modern types of services and sanctioning programs. These programs comprise measures aiming at job search assistance by means of counseling and monitoring and introducing sanctions in case of noncompliance. The program effectiveness was measured in terms of employment probability of the individual. In the case of young people, however, the positive effects were lower than for other age groups.

These studies have been criticized for neglecting the long-term effects of the training or sanctioning measures on the unemployed or recurrent unemployment spells. Indeed, the latter issue has been taken into consideration by Konle -Seidl and Eichhorst (2008) who attribute the shortages in the activation frame to the risk of recurrent falling out of employment, which reveals low sustainability of workfare measures for the most vulnerable groups. Moreover, the groups most likely to end up in activation measures are the most vulnerable groups. This then contributes to the overall comprehension of ineffectiveness of the measures for the participants leading to punishing the weakest parts of the target population.