Can Welfare-State Reforms in Europe Be Explained by Government Attempts to Improve Economic Efficiency? Discuss with Respect to a Social Policy Reform in Two Countries.

Can welfare-state reforms in Europe be explained by government attempts to improve economic efficiency? Discuss with respect to a social policy reform in two countries.

1. Introduction:

Pension systems were first introduced in Europe in the late 19th and early 20th century. In the post-war ‘golden era’ of welfare they were subject to wide expansion and increases in the benefits offered. They became the largest source of state welfare expenditure in Europe. However, by the 1980s the ability of these pension schemes to cope with the changing demographics and economic situation was placed under question. Reform was accepted as essential if pension schemes were to remain financially sustainable and so survive. Citizen attachment, needs to expand in the face of social developments, institutional path-dependency and fear of political retribution all served to inhibit and shape the reforms that have developed in an attempt to ensure the financial sustainability of pensions. This paper aims to illustrate via an analysis of pensions to what extent welfare reform can be explained by a desire to increase economic efficiency. The reasons for reform and then the objectives and constraints of reform will be highlighted in order to give an idea of the necessity and the complexity of the issue. Analysis of the pension reforms in Sweden and Germany will highlight to what extent their pension reform was driven by particular objectives (social justice or economic efficiency) and how much the political framework of a nation dictates the type of reform undertaken.

2. Why Reform Pensions?

Throughout the last twenty years European pension schemes have been subject to intense scrutiny and various reforms. Concern about the financial sustainability and fairness of pension schemes was provoked by fears that they were anachronistic and unable to deal with modern demographic and social changes. On the one hand increases in life expectancy, declining fertility rates, and the trend...