sou · GOB383 · 2001-01-01 00:00:00 — Information about the developments in economic welfare, measured in terms of income inequality, show that in both countries the depression caused surprisingly disturbance. During the deepest years of the recession, income inequality did not increase overall. This is partly explainable by the even distribution of economic misfortunes and unemployment across the population, and partly by the compensating impact of the welfare state, above all in the form of income transfers. Nevertheless, if social assistance is taken as an indicator of problems in making ends meet, falls in disposable incomes forced a growing section of the population to rely on last resort public support in both countries. While this can now be described as the general pattern of the develop- ment for both countries during the 1990s, the report has also aimed to present more accurate and specific data, in order to allow differences within this broad picture to be identified. The Introduction provided a working hypothesis on what to expect about the differences when developments between the two countries are compared (The working hypothesis was summarised in Table 1). The report addressed the three dimensions in the table in separate sections, while attempting to delve deeper into the component aspects. Firstly, according to the findings, the economic crisis can be divided into three aspects: an economic, employment and public financing cris- is. Secondly, policy reactions were scrutinised from various starting with a macro-focus on total public budget adjustment, and on changes in social protection expenditure and preconditions for local service provision. Policy reaction within social policy was examined more closely in four cases: cash transfers, elderly care services, child day-care services and activation measures. Finally, welfare was addressed using data on the distribution of unemployment in the population, income distribution data and social assistance data. Addressing first the nature of the economic crisis, dividing it into three elements makes it possible to distinguish differences in the severity of the crisis. Clearly, experienced a much steeper macro-economic decline and a far more pronounced growth and final level of unemployment. But in terms of employment rates the relative falls in the two countries appeared equal. This could be interpreted as there being more alternatives to unemployment in than , whether in the form of education, vocational training or other activation. It was later shown that at least in activation the emphasis in the early years of the 1990s was stronger in . The report con- tains no material to assess whether holding back unemployment growth in was a deliberate policy decision or not. Anyway, problems in employment in part led to an equally severe public financing crisis for both countries. As the magnitude of economic problems was not clearly related to the employment and public financing problems, it was suggested that differences between the countries in existing policy and in the capacity to adjust to shocks could be fruitful areas for closer examination. Turning secondly to policy reactions one can argue that although balancing of public budgets was by and large achieved in five years in both countries, the way this adjustment took place differed. seems to have been quicker than to initiate cutbacks in 1992, and continued them with undiminished vigour in the latter part of the decade. The estimates for 1999 and 2000 show that the countries seem to be diverging somewhat, with continuing a tighter budget policy. Although also introduced cutbacks in 1992-93, the weight of savings was predominantly in the period 1994-95, suggesting a slower reaction – but then again, more determined cutbacks within this limited period. Another big difference in policy choices seems to be the way adjustment was designed. In cuts in expenditures featured considerably more than tax increases, while in cuts were accompanied about fifty/fifty by tax increases. Thus cuts carried out in social policy appeared more severe in . The examination of social protection expenditures showed how un- employment forced social protection expenditures to soar in . By 1993 the share of income transfers as percentage of GDP had increased from to , and was on equal terms with . The catch-up was partly caused by increased expenditures, and partly by the sharper drop in GDP. Anyway, by 1993 the countries were more similar than ever in the post-war period with regard to their social protection expenditures, measured as percentage of GDP. Both countries made vigorous cuts in benefits. It may be that the strategy of cutbacks rather than tax increases in , together with policy choices to restore the compensation levels of some benefits in , has accounted for the steeper declining expenditure curve in since 1993. The faster decline in expenditures in is visible in both income transfers and total social protection expenditures. Surprisingly, the comparison of expenditure and personnel develop- ment in elderly care services and childcare services revealed more min- or reductions in than , although the large disparities in starting levels should be remembered here. In both countries the trends in service outputs did not favour the elderly. Institutional care was reduced in relation to the elderly population and home help was subject to heavy cutbacks. By the end of the period had become more like in terms of coverage. In contrast, the number of places for children in public day-care increased in both countries. which at the beginning of the period already had much higher day-care coverage levels, the increase in the share of children in public day-care places was much faster and thus the disparity between the countries further increased. In the fourth policy area adopted for comparison, the volume of labour market policies during 1990-94 expanded faster in than . While after 1994 the number of participants in activation measures as a proportion of the labour force declined in , the ratio continued to increase in until the trend ended in 1998. In 1998 was still the more activist country, but the relative difference had narrowed over the period. A difference could be detected in the focus of activation efforts; seemed to favour subsidised employment, while emphasised vocational training more. Thirdly, there were many similarities in developments in economic welfare. The way unemployment was divided between men and women and between different age groups showed a rather similar pattern in and . In both countries unemployment became more noticeably a problem for the young and the men, but since the reces- sion years these groups have been able to improve their situation. Looking at the development in incomes, the years of recession went by with surprisingly minor changes in income inequality among the popu- lations at large, though. In both countries income inequality has increased since the mid-1990s. According to the data presented income distribution developed less evenly across different socio-economic groups and household types in . Non-employed and single parents were more clearly the losers in than , but on the other hand, the young seemed to be the more obvious losers in . In both countries single parents and the young also increased their share among social assistance recipients; in other words, falls in their disposable incomes also meant genuine problems in making ends meet. What about the working hypothesis? Contrasting these findings with our working hypothesis shows that the reality displays more nuances; a more detailed comparison would doubtless add further detail and variety to our conclusions. Never- theless, on the basis of this report it seems justified to draw three conclusions concerning our working hypothesis. First, what seems important, at least when further discussing public policies, is that the economic recession years, maybe through different processes and mechanisms, led to equally severe problems of employ- ment and problems for the public economies of both countries. Second, while on the basis of overall policy adaptation one could be tempted to argue that carried out more considerable cutbacks, on closer look no simple assessment regarding mildness or harshness of policy reactions can be given as the judgement ultimately seems to depend on the sphere of investigation. For instance, on the basis of this report one could basic-ally argue that income transfers were under heavier attack in , while the premises for service provision seem to have altered more in . By giving examples in four cases the report has hopefully provided evidence that even this conclusion should be further elabor-ated by looking at variations within the different programmes (both cash and care programmes) Finally, it could be argued that the expectation of more uneven development in economic welfare in did not receive unquali- fied support from this report. Even with deeper macro-economic problems, higher unemployment and more extensive cutting of income transfer programmes, the trends in economic welfare in did not seem that different from , at least in terms of the data on income distribution (see also 1999; Halleröd and 1999). This is an unexpected conclusion that calls for both theoretical and methodological consideration. Economic welfare at the individual level is not a mirror image of macro-economic development and policy adjustments, as these impact different groups differently and because there are other factors at play, too. Against this one could argue that other measures, such as the social assistance indicator, point a gloomier picture of the social reality in , and one more in line with common expectations. A conclusion here could be that aggregate macro-data should be supplemented with more micro-level data on individual welfare. Are and still two of a kind? Finally, in the light of these findings, can and still be considered as two of a kind, and what do the trends of the 1990s reveal about the Nordicness of the two countries? To answer these questions comprehensively would ultimately need a fuller comparison encompassing countries outside the Nordic grouping, too. A more complete description of differences in levels would be helpful in such a task, not to speak of effective methodological solutions to assess conformity. Still, an overall conclusion based solely on this report is that Fin-land and have developed very similarly, there being few clear-ly divergent trends. And in those instances where differing trends could be found, the outcome is often that and have drawn closer to each other. Examples here could be public employment, the trends in public consumption expenditure, and institutional care for the elderly. In some other areas the trends are very alike, suggesting that the countries were quite similar in the beginning, followed similar paths, and remain two of a kind. Here one might for instance consider the trends in income distribution. Yet some objections to this conclusion stressing similarity are also evident, although perhaps not yet strong enough to challenge it. Regarding social policy adjustment we lack a more detailed compar- ison of developments in the income protection sphere, but the trends during the latter years suggest that cutbacks in social security in were rougher and have, together with rapid economic growth, been efficient enough to quickly reduce the social protection expendit- ure level close to the EU average. The fact that still has one of the highest unemployment rates in Europe and that of the population have received social assistance during a year calls into question the extent to which and remain two of a kind; at least the gap between them has grown in these respects during the last few years. It is interesting that in some respects developments especially after the economic crisis years display divergence. Regarding the ideal-typical characteristics of the Nordic welfare state we see examples of both continuity and breakaway development. On one hand, high taxation and high public spending as percentage of GDP still characterise both and , much due to circum- stances. Income inequality, although lately growing, seems to remain on a relatively lower level than elsewhere (see , forthcoming). In the sphere of child day-care and have become even more Nordic as their systems of public day-care have been expanding, notwithstanding that in part of the demand for provision has been absorbed by private solutions. On the other hand, there are examples of changes, which would appear to distort the ideal typical picture. While full employment has sometimes been regarded as one of the cornerstones of the Nordic model, the 1990s have seen anything but. Here we cannot judge whether the countries differed in their will to promote employment, nor whether there occurred a change in emphasis. What is clear is that cracks in this cornerstone forced governments to consider the whole spectrum of their social policy measures. It seems one consequence of the changes during the 1990s has been that the principle of univer- salism is now weaker than before after adjustments made in both the cash transfer side and to services.1 The universalism of policies can be questioned by the extent of the targeted means-tested social assistance and the fact that it has increasingly become a perpetual form of support for parts of the population. Developments in elderly care also raise questions about the elasticity of the concept of universalism. Evidently then, no straightforwardly simple yes or no answer to the question of whether and have lost some of their Nordicness can be given, as we see somewhat differing trends in various policy areas. 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