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How globalisation is changing the welfare state

As a result of globalisation, migration and technological advances, politicians have to make complex choices about social security and labour market policy. Professor by special appointment Olaf van Vliet will speak about this topic in his inaugural lecture on 7 June.

The labour market is changing rapidly. As globalisation takes hold, production processes are transferred to low-wage countries such as China, goods and capital flow more or less unhindered around the world and people on many production lines are replaced by robots.

This changing labour market also has a major impact on the welfare state, Olaf van Vliet will say his inaugural lecture. He is Professor by Special Appointment of Comparative Welfare State Analysis at Leiden University. People have lost some of their job or social security, particularly low-skilled workers and those working in the middle segment. This is on many fronts because their labour is easiest to outsource to low-wage countries or automate with robots and computers.

Greater income inequality

Van Vliet takes the typical bank employee as an example. ‘Payments are increasingly being made with apps and decreasingly with human hands. As a result, tens of thousands of jobs have disappeared at large banks in recent years.’ Many of these staff eventually find work again in other service sectors, such as the hotel and catering industry, but pay in these sectors is relatively low. According to Van Vliet, this leads to more income inequality.

‘An important question in coming years will be how social security and labour market policy can deal with the structural changes occurring on the labour market and how those losing out can be compensated,’ says Van Vliet, who has carried out extensive research in this field. Government funds are limited, and it is doubtful whether the classic welfare safety net is still adequate.  

‘Social investment policy’

A number of academic experts in the field argue in favour of a ‘social investment policy’. Jobseekers in such a system would no longer enjoy classic welfare protection such as unemployment and welfare benefits, but would instead receive an allowance to pay to retrain for different work, for instance. According to some, this would not only be better for the jobseekers themselves, but would also benefit the whole economy. The welfare state would then provide a ‘trampoline’ instead of a ‘safety net’.

In any case, it is clear that there appears to be less support from politicians and within society for welfare benefits, Van Vliet says. Welfare benefits in 1990 amounted to 59 percent of the average income from employment; by 2009 it had dropped to 52 percent. So year after year, benefits have increased less than average pay, which in practice constitutes a decrease in the disposable income of people entitled to welfare benefits.

Small decisions

In his inaugural lecture, Van Vliet says it is these developments that make research into the welfare state so interesting. ‘The relative decline in the level of welfare benefits is not the result of significant reforms, but is instead the result of many small decisions not to index welfare benefits in line with wage increases. We can only make these decisions visible by conducting empirical research. Assimilating and studying data will remain one of my focal areas in the coming years.’

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