WellSIRe

Investing in the future of the welfare state Social security was the core function of the welfare state when it was founded but today the focus has shifted to social investment, towards building people’s capabilities to participate in the knowledge economy, which will help sustain welfare provision for an ageing society. This topic is central to Professor Anton Hemerijck’s work as Principal Investigator of the WellSIre project.

European welfare states have seen continuous reforms in recent decades, as nations seek to adapt to the challenges of demographic ageing, technological innovation, and economic internationalization, alongside changing cultural and gender norms. Consequently, welfare states have moved beyond the traditional function of social security in the direction of social investment policies, such as widening access to childcare, longterm care and lifelong learning, as well as encouraging active ageing. These policies are typically designed to enable households to combine work and family life, and to boost employment rates and workforce productivity in today’s knowledge economy.

The WellSIre project, led by PI Anton Hemerijck, Professor of Political Science and Sociology from the European University Institute (EUI) in Florence, aims to explain both welfare state stability and change, as well as the effect of social investment reforms on citizens’ life chances and the overall economy.

This is conducted by analysing how social investment is associated with employment and redistribution, by gender and age, at the country level (Layer 1); examining the individual- and household- level inferences on employment, poverty (Layer 2) and subjective wellbeing (Layer 3), with a focus on particular

www.euresearcher.com

emphasizing the role of the EU in social investment policy diffusion (Layer 4), and the practices of social investment policy delivery at the sub-national level across post-industrial European cities (Layer 5).

Post-industrial society

risk groups and the availability of social investment provisions across critical lifecourse transitions. The manner and extent to which welfare provision has moved towards the social investment template varies considerably across countries. Making comparative sense of this transformative change, both in theoretical and empirical terms, the project addresses the comparative politics of social investment reforms across European countries,

At its core, the objective of 21st century social investment reform is to enhance people’s opportunities and their ability to deal with the ‘new’ social risks typical of post-industrial societies. Work, income, family, and lifecourse trajectories are central to the social investment paradigm, particularly with the gradual growth in employment rates among women since the 1990s and increasing marital instability. This calls for a more genderinclusive outlook that stresses equal access to employment as a prerequisite for female economic independence and child wellbeing.

Based on his team’s research, Hemerijck has been able to confirm a ‘life-course multiplier’ mechanism, whereby social investment returns reaped over the life course generate a positive cycle of wellbeing returns, in terms of employment opportunities and gender equity, with a positive impact on intra- and intergenerational poverty mitigation. Fundamentally, an individual’s prospects of a healthy retirement correlate strongly with whether they enjoyed a happy childhood (see Figure 1 overleaf).

13

At the micro-level this multiplier suggests that social investments - from early childhood on - improve material household wellbeing (employment and income) and help mitigate social risks later in life through opportunities to gain new skills, helping to ease (gendered) labour-market transitions.

At the macro-level, the multiplier suggests a variety of societal benefits, ranging from improved productivity, higher employment, and reduced gender gaps to lower poverty, longer careers, and later retirement. These are all crucial to economic growth and the fiscal sustainability of the welfare state in today’s knowledge economies, which need to generate the wealth to support growing numbers of elderly people.

Central to the financial sustainability of the modern welfare state is the number and productivity of current and future employees and taxpayers. To overcome the unwarranted opposition in the academic discourse between passive, ex post compensatory social policies and active, ex ante capacitating social policies, Hemerijck has developed a new twentyfirst-century conception of the welfare state comprising three core functions. The first is about fostering the lifelong development of human capital, helping people develop the skills they need to thrive in today’s knowledge economy, a function which Hemerijck describes as ‘stock’. These cover the education and training designed to improve people’s capacity to work. The second is easing the ‘flow’ of family life-course and labour market transitions in a gender-balanced fashion, helping people balance work with family life and other commitments over their lives.

The third is about sustaining inclusive social protection ‘buffers’, a prerequisite for those (temporarily) out of work.

The evidence shows that policies promoting ‘stock’ and ‘flow’ functions contribute to ensuring high levels of employment, helping to sustain the ‘carrying capacity’

14

wellbeing when they know that there is good quality and affordable childcare in the vicinity,” says Professor Hemerijck.

Processes of social investment reform across various welfare states studied in Layer 4 are analysed by identifying the political drivers and institutional factors shaping reform sequences across ten countries and is centred around three key empirical questions.

“First, have buffers become more inclusive?

Second, have stocks become more lifelongoriented? Third, have the flows become more gender balanced?” outlines Professor Hemerijck. “We have a database on all the relevant reforms. We are busy assessing

governing and reforming the welfare state as all EU member states are grappling with economic and demographic challenges. Over his career Professor Hemerijck has worked closely with policymakers. As a prominent member of the EU High-Level Group on the Future of Social Protection and the Welfare State, many of Hemerijck’s insights have found their way into the HLG report that was launched by the European Commission in February of this year.

With the acceleration of demographic aging, Professor Hemerijck believes it is a sine qua non not to leave anybody behind, but rather invest in the skills people need

WellSIRe Wellbeing Returns on Social Investment Recalibration

Project Objectives

The focus of the welfare state has shifted over recent years towards an increased emphasis on social investment, towards building people’s capacity to participate in the modern knowledge economy. This encompasses equipping people with the skills they need for the modern workplace, developing policies that help people stay in work during transitions in their lives such as having a child, and redistributing resources to support people who fall out of work.

Researchers in the WellSIRE project are using a conceptual framework of ‘stocks’, ‘flow’s and ‘buffers’ to analyse the social investment paradigm and assess its effectiveness in supporting and enhancing wellbeing in several European states.

Project Funding

In order to pay for popular social protection, it’s imperative to invest in children and families and the social service backbone of advanced economies.

FIGURE 1. The social investment life course multiplier at a micro and macro level. Adapted from source: A. Hemerijck, S. Ronchi, I.Plavgo, Social investment as a conceptual framework for analysing well-being returns and reforms in 21st century welfare states, Socio-Economic Review, 2022, https://doi.org/10.1093/ser/mwac035

of welfare state ‘buffers’. “We see that with the Scandinavian countries, and to some extent the Netherlands and Germany,” says Professor Hemerijck. Countries that combine a strong emphasis on social investment and inclusive buffers are generally in a good position to recover quickly following an economic crisis by minimizing its impact on poverty and unemployment. Over time, researchers observe a relatively coherent trend of increasing spending on capacitybuilding services in combination with social protection cost-containment, without per se undermining inclusive income protection.

While the evidence at the macro-level of the economy (Layer 1) is strong, the individuallevel findings (Layer 2) show that education and active policies have a positive impact on employment rates, together with a positive

knock-on effect of poverty mitigation across the life course, which is also apparent among hard-to-reach groups. Also, more effective ‘stock’ and ‘flow’ policy complementarities are associated with higher employment rates among mothers and lower levels of child poverty. With respect to working-age individuals the EU evidence suggests that education, active labour market policies, and day-care services reinforce each other’s effectiveness in promoting employment and fighting poverty across one’s life course, particularly for single mothers in Germany.

Moving from material to subjective wellbeing, work on Layer 3 suggests that higher life satisfaction is achieved in countries with social investment policies designed to support families and encourage lifelong learning. “Young couples experience positive

EU Research

where countries have been moving and why, considering their political systems, social partnership and administrative traditions.”

The project’s agenda also includes investigating the delivery of capacitating services on the local level in several urban centres. These are post-industrial cities, which Professor Hemerijck describes as laboratories of social investment. “Post-industrial cities tend to attract sizable numbers of highly skilled people, which may crowd out more vulnerable households. But low-skilled workers are still needed to provide essential services, as we saw during the pandemic,” explains Professor Hemerijck. In addition, many post-industrial cities like Amsterdam, Stockholm, Vienna, and Warsaw are governed by progressive citygovernments, and as such they seek to tame perverse exclusionary dynamics.

Reforming the welfare state The findings of the WellSIRe project hold great value for policymakers charged with

www.euresearcher.com

in the knowledge economy. “It’s not that social protection isn’t important, but to finance it you need a lot of people working in the economy. You need to reap the returns on social investment to pay for social protection in knowledge economies and ageing societies,” he explains. Not so long ago, Europe’s political elites were wary about the future of the welfare state, questioning the impact of social spending on competitiveness. Today, we know better.

What matters is not the quantity or ratio of social spending, relative to GDP, but its quality, composition, and efficacy. In many countries, a social investment-oriented welfare state helps boost competitiveness based on a normative ethos of inclusive and capacitating, or ‘stepping-stone’ solidarity.

“The greater the focus on social investment, the greater the revenue base produced by people in work. That means there are more resources to buffer well and work on antipoverty programmes,” Hemerijck concludes.

This project, which will cover the period 9/20208/2025, has received funding from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme (grant agreement number 882276).

Project Participants

Research Fellows: Ilze Plavgo • Johannes Karremans • Heta Pöyliö • David Bokhorst Ph.D. Researchers: Luca Cigna • Manuel Alvariño Vázquez • Leon Küstemann

Contact Details

Principal Investigator, Prof. Anton Hemerijck Department of Political and Social Sciences European University Institute (EUI) Via dei Roccettini 50014 San Domenico di Fiesole (FI) Italy T: [+39] 055 4685 442 E: anton.hemerijck@eui.eu W: https://wellsire.eui.eu/ Hemerijck, Ronchi, Plavgo (Socio-Economic Review). This article is also the reference to the life-course multiplier figure in the review.

The book, forthcoming: Anton Hemerijck and Manos Matsaganis, Who’s Afraid of the Welfare State Now?, Oxford University Press, 2024.

Prof. Anton Hemerijck, DPhil

Anton Hemerijck is Professor of Political Science and Sociology at the European University Institute in Fiesole, Italy. He holds a DPhil from the University of Oxford, and regularly advises the European Commission on social policy, social investment and the welfare state.

15