Les 4 modèles sociaux européens / Rapport Sapir (extraits)

A few days after the No votes in the French and Dutch referendums, Martin Wolf (2005)

wrote a piece in the Financial Times entitled “Crushing reality of eurozone”, which concluded

that: “The struggle for the constitutional treaty is over. The battle for a successful currency

union has begun.” His point being that poor economic performance of the eurozone was one

of the principal reasons for the No votes and that monetary union may not survive a prolonged

period of economic difficulty. Although the demise of the eurozone, or the exit of some its

members, is certainly not as close as some proclaim, the fact of the matter is that discussion

about the possible break up of the currency union will continue to surface from time to time as

long as its members remain plagued by inflexible markets – especially labour markets – that

prevent them from making the necessary economic adjustments.

FOUR EUROPEAN SOCIAL MODELS

There are so many differences among national welfare state systems that the very notions of

“European model” or “Social Europe” are rather dubious. I prefer to use the now familiar

grouping of national systems into four different social policy models in order to examine the

relative performance of each model along a number of dimensions. The four models cover

four different geographical areas.

Nordic countries (, and , plus the ) feature the highest

levels of social protection expenditures and universal welfare provision. There is extensive

fiscal intervention in labour markets based on a variety of “active” policy instruments. Strong

labour unions ensure highly compressed wage structures.

Anglo-Saxon countries ( and the ) feature relatively large social assistance of the last resort. Cash transfers are primarily oriented to people in working age. Activation measures are important as well as schemes conditioning access to benefits to regular employment. On the labour market side, this model is characterized by a mixture of weak unions, comparatively wide and increasing wage dispersion and relatively high incidence of low-pay employment.

Continental countries (, , , and ) rely extensively on insurance-based, non-employment benefits and old-age pensions. Although their membership is on the decline, unions remain strong as regulations extend the coverage of collective bargaining to non-union situations.

Finally, Mediterranean countries (, , and ), concentrate their social spending on old-age pensions and allow for a high segmentation of entitlements and status. Their social welfare systems typically draw on employment protection and early retirement provisions to exempt segments of the working age population from participation in the labour market. The wage structure is, at least in the formal sector, covered by collective bargaining and strongly compressed.3

I should say at the outset that I am obviously aware that there are not only wide differences

between these four models but also within each of them. An in-depth analysis would

obviously require paying close attention to such differences as well. However this will not be

done here for the sake of brevity. I will therefore refrain from comments on individual

countries, sometime at the cost of great oversimplification.

Boeri (2002) compares the performance of the four models in terms of meeting three

objectives of social policies:

(1) reduction of income inequality and poverty;

(2) protection against uninsurable labour market risk; and

(3) reward to labour market participation.

This suggests that both Nordic and Anglo-Saxon models are sustainable, while continental

and Mediterranean models are not and must be reformed in the direction of greater efficiency by reducing disincentives to work and to grow.

In conclusion, there is a strong case for reforming European labour market and social policies,

especially in continental and Mediterranean countries. There are two overriding reasons for

focusing on these two groups of countries.