Political barriers to welfare reform

Welfare states can only meet the double challenge of sustainability and adaptability if governments develop alternative modes for the production of welfare services.

As part of an FP7 research project coordinated by WIFO, we explore the potential shift away from monetary transfers to households to the provision of social services and labour market activation as well as the factors determining the speed of this adjustment. Throughout the analysis, we focus on provisions for disabled people, where both shifts have been observed, but with much variation across Member States. We published our work in two related working papers.

The first paper relies on the assumption that some European welfare regimes have a similar initial structure but may differ in their speed of adaptation to the challenges posed by external shocks. A detailed comparison of fast moving and slow moving countries allows us to identify some of the barriers to change. Comparing policy developments in Finland, Norway, and Sweden in the past twenty years we identify fiscal constraints, historical commitment to equal rights, policy making capacity, and centralisation as important drivers of change.

Some recent empirical evidence has challenged the supposed inability of the Continental regime to undertake employment friendly reforms. The second paper contributes to the understanding of this recent phenomenon by examining policy change regarding the activation of people with disabilities. Drawing on a dataset developed by OECD (2003, 2010) and Scharle and Váradi (2013), the paper identifies policy relevant lessons on what drives and hinders institutional change in disability policies, and offers some recommendations on how such changes may be facilitated. The main finding is that regime types do converge in terms of overall policy direction but continue to differ in the particular choice of policy tools.

WIFO