FROM SAFETY NET TO TRAMPOLINE : LABOR MARKET ACTIVATION IN THE NETHERLANDS AND DENMARK

In recent years Denmark and the Netherlands have made dramatic shifts from passive to active labor market policies. Though often portrayed as a necessary response to high levels of structural unemployment, such changes are more than a mere technical adjustment of welfare programs to a changing economic climate. They represent new ideas about the goals of public policy and the social rights of citizenship. This paper surveys the politics of labor market policies in the two countries to demonstrate that the recent activation programs reflect a departure from the ideas and goals of the postwar welfare state. Denmark and the Netherlands are two countries with extensive and generous welfare states. They have also been remarkably passive in their approach to welfare assistance, though this aspect was less well known (Kersbergen and Becker 1988). Generosity was expressed in relatively high levels of income support for those disaffected by the market. Passivity meant that cash assistance was the full extent of the welfare state’s obligation, and the state did little to promote participation or reentry into the labor market. The passive aspect of these two welfare states went unrecognized because it had never posed a problem, at least not until recently. In the last ten years, however, structural unemployment, sometimes combined with an expansion of programs of cash assistance, propelled an explosion of the costs of the welfare state. Concern about the rising costs has encouraged a shift in perceptions about the effectiveness of the welfare state. Now there is a growing perception in both countries that the welfare state fails to go far enough if it only places a safety net under those who fall outside of the labor market. The new thinking places greater emphasis on labor participation as an intrinsic good for society as well as the individual, and new policies have been put in place designed to “activate” a large proportion of those dependent on welfare assistance. To borrow a metaphor coined by the Social Services office in Rotterdam, the safety net is being replaced with a trampoline (Gemeentelijke Sociale Dienst Rotterdam 1992: 146). This change in focus marks a dramatic reform of the welfare state project. As such it offers a fundamental challenge to those who believe that the welfare state has weathered the economic crisis with its basic principles intact. The shift from passive to active labor market policy indicates a dramatic rethinking of the purpose of the welfare state. Beginning with the assumption that policy changes reflect changing ideas, this paper argues that Denmark and the Netherlands are at the threshold of a paradigm-shift in thinking about the welfare state. The project proceeds as follows. First, the theoretical aspects of the paradigm-shift in welfare policy are discussed. Second, the old paradigm of passive social welfare in the Netherlands and Denmark are described, and it is argued that they existed in welfare states that can be best characterized as social liberal in their ideological principles. Third, the new active initiatives are described, paying attention to the developmental sequence towards bolder initiatives that challenge the old welfare paradigm most fundamentally. Policy Paradigms and New Initiatives There is a debate among scholars as to where welfare programs fit in modern, industrialized societies. The dominant argument is what Ramesh Mishra calls the “irreversibility thesis” (Mishra 1990). According to this thesis, welfare programs have become permanent features because their steady growth produces more and more constituents who benefit from the programs and strive keep them in place. The most commonly accepted explanation for the irreversibility thesis identifies the growth of programs with the increasing acceptance of a liberal notion of rights. Most clearly articulated by T.H. Marshall (1964), welfare states are based on social rights, and this category of rights has been embraced by western societies with the same vigor as civil and political rights. As rights become more entrenched, using the language of rights to legitimate welfare benefits makes those benefits more easily defensible. In recent years, however, there is a growing dissatisfaction with the proliferation of rights. In addition, it has become more expensive to satisfy rights claims. These two developments, the discourse critical of rights and the growing cost of welfare programs, have sent most welfare states into two parallel crises, a legitimation crisis and a fiscal crisis (Ploug 1994). These crises challenge the intellectual paradigm on which welfare states are built. The way governments have responded to the crises also challenges the irreversibility thesis. This is not to say that welfare states are being eradicated, but the types of reforms that are being enacted to address the crises represent a qualitative shift in the idea of the welfare state. In essence, the efforts to preserve welfare states by reforming them amount to a paradigm-shift in thinking about what welfare programs should do for citizens, and how they should be organized. Peter Hall (1993) has developed the best framework for understand the process of paradigm-shift in public policy. Hall argues that fundamental policy change proceeds through three developmental phases. During the first phase, actors have difficulty identifying the problem and strive to continue with their accustomed practices. Incremental adjustments are the expected result. During the second phase, bigger problems offer serious challenge to the policy paradigm. In attempting to address the new problems, policy makers develop awkward solutions that stretch the logical limits of the existing paradigm. Solutions do not challenge the fundamental beliefs, but because the existing structure is being stretched to encompass problems it was not designed to address, tension begins to build. Finally, when the level of tension crosses a certain threshold, the paradigm proves not only incapable of handling new problems, but of defending itself. The result is an exhaustion of the old way of thinking that clears the deck for new ideas and better solutions to the current problems. The language of paradigm shift has been used by the proponents of a new, ‘active’ approach to unemployment and income assistance. The Organization for Economic Cooperation and Development (OECD 1994), for example, argues that the liberal paradigm of social welfare causes a dysfunctional distinction in society between those who work and those who do not. Instead, the OECD advocates a new, more inclusive way of thinking that adopts work as the norm for all members of society. Programs designed to place more citizens in paid work, rather than cash assistance for those who do not work, are one step towards this goal. Making this policy shift, however, requires a sea-change in thinking about social policy. William Waters (1997) argues that what the OECD has in mind is a new politics of the self, one which moves away from the liberal idea of the autonomous self towards one in which individual identity is constituted of specific behavior. Such a change would require a different conception of the proper role of the liberal state. Presently, liberal states are neutral as to whether individuals work or not. If the state becomes partisan on the question of what activities citizens should engage in, it assumes a non-liberal role. This article asks whether such a paradigm shift indeed is indicated by recent efforts to promote labor market ‘activation’ in Denmark and the Netherlands. These two countries are important test cases of the argument because they have been at the forefront of policy innovation in this area. If the paradigm shift is to be observed anywhere, it should be apparent in these two countries. The Old Paradigm of Passivity As in most countries of western Europe, The great expansion of the Danish and Dutch welfare states took place in the postwar period. Following economic reconstruction, governments in both countries set out to implement sweeping reforms of social welfare that placed them among the most generous in Europe. Though often classified within the “Scandinavian model,” these two cases actually fit uncomfortably within most of the existing typologies of welfare states. Denmark is always closely associated with the Scandinavian model, or what Richard Titmuss called the “institutional” welfare states (Andersen 1993). Here the idea of solidaristic social welfare is institutionalized in the form of universal social security programs and redistributive financing. Indeed, Denmark once stood as a perfect example of this. The basic program of social security, the Folkepension, provided a universal income guarantee and was financed out of general revenues rather than contributory taxes. Unemployment assistance was likewise basic and solidaristic. Benefits were flat-rate, not tied to previous income, and entitlement was independent of the length of participation in the work force. The Netherlands has been a more tricky case to classify. Sometimes it is lumped together with the Scandinavian model because of its generous levels of support, especially if one looks at programs of income assistance and health care. On the other hand, its social security system was built upon achievement principles, not solidaristic ones. This means that in addition To be perfectly accurate, a benefit distinction was drawn between full-time and part-time workers, and there was a qualifying period for receiving benefits. These, however, are minor differences. Gosta Esping-Andersen (1990) cannot decide where the Dutch case fits in his model. to the generous programs of basic assistance, contributory social insurance provided an added layer of income-related benefits for those in the work force. Because the premiums were contributory, social solidarity was weakened, and because the benefits were income-related, the programs re