The European Welfare State:
Five Things You Should Know
(1) ‘Skivers’ are not bankrupting the state.
The popular perception that unemployment benefits make up a significant proportion of state spending is misguided. Unemployment benefits are in fact a very small share of all social spending.
(2) Europe is not unusually generous.
Contrary to popular belief, there is nothing exceptional about Europe when it comes to social spending. Per capita spending on social protection is broadly the same in the United States and Japan, and higher in Australia.
(3) Demographics are a bigger threat than austerity.
The primary challenge for the European welfare model is how to maintain its affordability in the face of a rapidly ageing population. The combination of lower birth rates and longer life expectancy means that the number of working-age people supporting each elderly person will fall sharply, from 3.5 today to just two in 2050.
(4) Immigration is a good thing.
With many European countries facing a decline in the working population, the arrival of young, dynamic workers is likely to prove helpful. The refugees and migrants currently entering the EU will put short-term pressures on social security budgets, but even as many as one million migrants would be just 0.2% of the EU population and well under 1% of the number dependent on welfare. In the longer term, migrants tend to move into jobs and become net contributors to the coffers of states.
(5) Welfare is not just a cost.
Fiscal sustainability has to be respected and governments that have allowed social spending to race ahead of their fiscal capacity will have to rein in the excesses. But the general proposition that European welfare spending needs to decline sharply as a proportion of GDP is false. Productivity and economic competitiveness are boosted, rather than impeded, by social spending that improves the health, skills, well-being and opportunities of its citizens.
For more on this topic, see Chatham House’s new research paper,
‘The Welfare State in Europe: Visions for Reform’.
