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de-commodification and (b) social stratification. According to these dimensions,
countries can be part of the Corporatist, Universalistic or Liberal model. This
classification was then completed by Ferrera that added a fourth typology, the
Mediterranean one to which Italy belongs. This is to say that Denmark and Italy
gave life to two different welfare regimes, which indicates that both the inputs that
originated them in terms of values, preferences and systems of production and the
outputs that they produce in terms of policies are different.
The aim of the second chapter will be to reconstruct the long-term trend in labour
market policies with a closer look at the latest years, i.e. when flexicurity became
somehow popular among governments and the European Commission. The long-
term trend could be read as a struggle between the two worlds of producers and
workers and what altered the balance is the economic background. We will see
indeed that in the development of labour market policies two shocks were
fundamental: the crises of 1929 and 1973, one that started an expansion of
workers’ rights and welfare states in general and one that inverted the course. In
the last years, the launch of the European Monetary Union together with
globalisation can be seen as the third shock that opened the way for the European
Employment Strategy and, lately, for the flexicurity model. Very important for the
latter is the Communication on flexicurity
1
whose principles have been accepted,
of course not without some critics, by the other Community institutions and
umbrella organisations of trade unions and business.
Basing on the definition of flexicurity provided in this Communication, in chapter
3 and 4 I will check how Denmark and Italy perform. The aim of chapter 3 is to
give an as much exhaustive as possible description of the famous system that came
out of the reforms of 1993-94 (and minor later modifications), providing data on
labour markets but also on the general economic situation and cidizens’
satisfaction. The final goal of the fourth chapter is instead to describe the Italian
system to figure out the starting points on which, eventually, flexicurity would be
installed. In particular, three reforms that contributed to re-shape the Italian labour
market will be analysed: the Treu Package of 1997, the Biagi Reform of 2003 and
the Welfare Protocol of 2007.
1
N. 359, 26 June 2007.
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Chapter 5 will, first of all, provide a comparison of the two countries on a number
of selected variables that will come out of the descriptive analysis of the countries.
And, at a second stage it will explore the possibility of policy learning in the frame
of the neo-institutionalist theory. Differences are expected to be relevant, which is
something that would exclude the possibility of importing flexicurity in Italy.
However conservative forces in the society might be balanced by international
economic trends toward more openness and the role of the Commission in guiding
the path towards changes necessary to preserve European welfare states by making
them sustainable in the long run. This is explicitly stated in a paper attached to the
Social Agenda that was published the 2
nd
of July 2008, where we can read “The
Communication emphasises the need to prepare the European Union to cope with
the challenges of globalisation better and to promote social management of change
and restructuring. (…) Such adaptations (…) are necessary for the company to
remain competitive. They also bring new opportunities (…). The social
management of restructuring is designed to reduce the negative effects of such
adaptations”.
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1. Classification of welfare state regimes
The purpose of this thesis is to figure out whether flexicurity (intended as the
combination of policies for a higher flexibility in the labour market with the
maintenance of good levels of social protection, as it will be largely explained in
the next chapter) is exportable or not, in other words, if the model can be replicated
in Italy, a country with different characteristics compared to the Denmark. To
answereg this question it is necessary to understand which those characteristics are,
beginning from the socio-economic background of the two countries concerned.
The best starting point, in order to outline the backgrounds, is therefore the
classification of welfare regimes, for which a wide literature exists. The father of
the categorisation is G. Esping-Andersen that in 1990 wrote the seminal book “The
three worlds of welfare capitalism”. The second section of this chapter takes into
account some criticisms to this classification, such as the modification proposed by
Ferrera of adding one cluster: the Mediterranean one or an alternative classification
proposed by Hall and Soskice. The last section focuses instead on the latest
developments that, apparently, without denying the precedent tradition, try to bring
additional elements to the analysis and test the performance of the different welfare
systems.
1.1 The three worlds of welfare capitalism
According to Esping-Andersen (1990), there are three types of welfare regimes:
liberal, corporatist and social-democratic that result from the combination of three
dimension:
- De-commodification
- The type of stratification
- The equilibrium between family, market and State and their role in satisfying
needs.
De-commodification indicates to what extend rights are attributed to the individual
himself or to the individual as a worker. In other words, how much the welfare can
“emancipate individuals from market dependence”. Cases of de-commodification
are, for example, the possibility of taking a maternity leave without losing
income/job rights or enjoying health care facilities independently from the
employment status but for the mere fact of being a citizen. The second issue is
social stratification. Esping-Andersen argues that “the welfare state is not just a
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mechanism that intervenes in it, and possibly corrects, the structure of inequality: it
is, in its own right, a system of stratification”.
According to the extend to which and the way welfares promote or avoid de-
commodification and stratification, countries fall in one of the welfare categories
outlined by Esping-Andersen.
The first is the liberal typology where needs are satisfied by the market and the
State intervenes only if necessary, therefore it has a residual role. In this type,
benefits from the government are related to a means test that makes the de-
commodification very low as individuals are treated according to their buying
capability.
In terms of stratification, this regime promotes a clear distinction between those
who benefit from the welfare intervention and those who do not need it. Therefore
a dualism emerges as the lower class will rely on state means tested and minimal
services, while those who can afford it will recur to a private company. Healthcare
could be an example.
The conservative welfare provokes less inequality but does not solve the problem
as benefits are connected to the affiliation in a particular cluster of the society:
there are different provisions for different groups; civil servants, for example,
enjoy a special treatment. Ensuring different rights to different groups was, on the
one hand a way to reward loyalty and, on the other hand, a tool to fragment the
labour force and make raising trade unions weaker at the time when welfare states
were born. This typology of welfare indeed emerged in countries were there was a
guild tradition. The result is that the regime freezes differences that are based on
the occupation and in fact the system is also labelled “Corporatist”. The State has a
more active role but residual to the family which is the centre of the Welfare
provision.
In the social-democratic system, de-commodification is maximal; individuals
receive benefit as such, without any means testing and no special requirement but
the citizenship. This has a high positive effect on social stratification by putting
everybody at the same level, the highest possible. This approach arises from a
homogeneous society and fosters national solidarity. The State has a huge role and
it is the main provider of services.
In 1999, speaking about welfare restructuring, Pierson added more information to
each typology. As far as Liberal regime is concerned, he noticed that taxes,
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spending and public sector employment in low, but still these are also the countries
were the tendency to retrench was stronger and more aggressive. This is due to the
political weakness of those touched by cuts. Indeed, he also finds out that both
employees and employers organisations are weak and have little capacity of
coordinating to promote common interests or negotiate reforms. Their inability
makes parties stronger: it is up to partisan politics to formulate and implement
reforms. Probably not by chance, none of the countries in this regime has
proportional representation, but, on the contrary they have in common two-parties
systems. About the type of services provided by the State, these are largely means-
tested and often people that can afford it, rely on private ones for healthcare,
pensions and childcare. Therefore, these people might be more appealed by
politicians proposing further cuts in the expenditure.
Conservative regimes are characterised by high level of spending, strongly biased
towards pensions expenditure. It is also a “bread-winner” model, that, at least in
the past used to discourage women employment with a positive attitude towards
the welfare. The political panorama is influenced by proportional representation
which makes single-party governance improbable therefore generating “multiple
veto points”. Within the left wing, Social Democratic parties are present and
strong, whereas the right is dominated by Christian Democrats that played an
important role in shaping the welfare. The problem with this type of regime, as we
will also see in the third section of this chapter, is that low fertility rates combined
with low (especially women) employment rates and high spending on pensions, put
a high risk on the long term sustainability of the whole system. On this point,
Pierson adds to the cleavage between insiders and outsiders outlined by Esping-
Andersen, a second cleavage between supporters of the status quo and those that
advocate a liberalisation.
Finally, the main feature of the social democratic regime is high spending in a long
list of social fields, which makes unnecessary recurring to the private sector. For
example, it organises comprehensive assistance to mothers achieving, at the same
time, the highest women employment rates in Europe and high fertility rates. The
only long-term problem with this system is to continue keeping public expenditure
in equilibrium, considered the fact that the system is expensive.
From the political point of view, Scandinavian countries often have coalition
governments. However, parties and government are not the only policy-makers:
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they have to negotiate reforms with the social partners that are extremely popular
and active in bargaining with governments. The consequence is that in case of
formulation of a reform, the latter will be more easily accepted in the society, but it
also mean that no reform is imaginable without the consensus of all interested
parties.
1.2 Main developments in the literature
Being the very first attempt to classify welfare states from a new point of view,
which is going beyond the idea that a higher social expenditure is necessarily
synonym of higher quality of welfare, The Three World of Welfare Capitalism is
considered the milestone of the literature on the topic. Nevertheless, on the other
hand it aroused several comments and criticisms. The very first one concerns the
number of regimes.
The most famous variant to Esping-Andersen categorisation is the correction by
Ferrera that consists in adding one case: the Mediterranean model that concerns
Italy, Spain, Portugal and Greece. In previous categorisations those countries were
considered part of the corporatist tradition, just a little bit different as they
developed their welfare states later and are therefore still immature. Ferrera lists a
number of characteristics that allow speaking about a distinct “Latin-rim”. Which
are those features?
1. A fragmented and contradictory welfare system, very generous with some
categories, especially pensioners, and neglecting completely others. This goes
hand in hand with an unbalanced protection that favours insiders of the labour
market.
2. Inefficiency of the public administration combined with persistence of
clientelism.
3. Universal health care system but still with unconventional mixture with private
actors.
4. Strong influence of the Catholic Church.
5. Low degree of state penetration and collusion between public and non-public
actors and institutions.
6. All countries never developed or they did develop very late universal minimum
income support. The first was Portugal in 1996.
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Chart 1.1 three (four?) worlds of welfare capitalism
Source: own elaboration
Ten years later, Hall and Soskice (2001) arrive to a similar categorisation by
starting from a different point of view. Indeed, they put the firm and the type of
relation it builds at the centre of the analysis, in particular: industrial relations,
education, corporate governance, inter-firms relations and relations with
employees. According to the way firms built these relations, countries fall under
two categories: liberal market economies vs. coordinated market economies. In the
first, competition and formal contracting drive relationships; in the second,
collaboration and networking prevail. Three factors determine the choice of one or
the other type: institutions, organisation and culture. Starting from institutions, the
ones common to both systems are market and hierarchies. Nevertheless, what
makes the difference in coordinated capitalism is the development of other
institutions that allow reducing uncertainty and promoting exchange of
information; for instance, powerful trade unions and strong business/industry
associations. Formal institutions are then complemented by informal rules and
cultural elements meant as “a set of shared understandings or available ‘strategies
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for action’ developed from experience of operating in a particular environment”.
Thus companies find themselves in a certain environment and chose the best
strategy to take advantage of it. According to these parameters, Hall and Soskice
group OECD countries in the following way. The ones that belong to the liberal
market group are: USA, Britain, Australia, Canada, New Zealand and Ireland;
whereas Germany, Japan, Switzerland, the Netherlands, Belgium, Sweden,
Norway, Denmark, Finland and Austria belong to the other. The cluster analysis
then shows another group made by France, Italy, Spain, Portugal, Greece and
Turkey, what exactly confirms Ferrera’s idea of a Mediterranean regime.
1.3 Recent developments
In a paper dating November 2005, Sapir uses Esping-Andersen’s classification, in
Ferrera’s corrected version, in a very interesting way: he classifies welfare systems
according to two variables, efficiency and equity.
However, before doing this, he briefly describes the four systems adding some
content to the previous analysis. He observes that Nordic countries have the highest
social expenditure and a “highly compressed wage structure”. On the opposite side
there are Anglo-Saxons regimes that are characterised by weak trade unions and
wider income inequalities. Somewhere in between, Continental systems where
unions are strong but on a declining path and benefits are insurance-based. In
Mediterranean countries, finally, there is strong “old age bias”. Sapir also dedicates
a section to the management of labour market risk in the different system. Two
options are possible: employment protection legislation or unemployment benefits,
the former that protects workers and the latter unemployed, or, in other words,
insiders and outsiders of the labour market. Which of the two solutions or which
combination of them does welfare regimes adopt?
Mediterranean countries prefer high protection legislation and low coverage of
unemployment benefits, whereas Nordic countries the other way round.
Continental systems have strict employment protection legislation but also
generous unemployment insurance; the same for Anglo-Saxon regimes but with
looser legislation. As far as employment rates are concerned, they are much higher
in Nordic and Anglo-Saxon welfares than in the other two. At this point, Sapir puts
together all these information and attempts an evaluation of the performance of the
systems based on two criteria: efficiency and equity. By efficiency he means the
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ability of the system to provide incentives to work therefore resulting in high
employment rates. There is, in fact, a strong connection between the strictness of
the employment legislation and the employment rate: the higher the first, the lower
the second. For measuring equity, he takes into account the risk of poverty.
The outcome is summarised in the table below.
Table 1.1 The four European Models, a Typology
Efficiency
LOW HIGH
HIGH Continentals Nordics
Equity
LOW Mediterranean Anglo-Saxons
Source: Bruegel Policy Briefing, November 2005
The only one scoring high in terms of both equity and efficiency is the Nordic
model. But equity has a price in terms of high level of taxation. On the contrary,
Anglo-Saxons perform equally well in terms of efficiency but pay in terms of
equity. What they have in common is flexible employment protection legislation.
The two non-sustainable systems are the Continental and Mediterranean ones that
differ from the first group as they tend to protect insiders of the labour market.
They both rely on high EPL, which is a cheaper way to protect workers from the
point of view of the State, while unemployment benefits must be financed
somehow, taxes, debt or insurance systems. The problem is that the Mediterranean
spends money in an inefficient way without even achieving equity.
The main goal of this chapter was to review the main contributions to the
development of a structured analysis of welfare states able to include both
qualitative and quantitative elements. The clear message is that no matter which
classification we find more convincing, we will hardly find Italy and Denmark in
the same group. Over the past century indeed, the two countries created completely
different institutions to deal with social governance, highly influenced by historical
heritage, preferences, values and economic structures.
The next step in this analysis is an outline of the development of labour markets in
Europe with a closer focus to recent choices, especially from the point of view of
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