LETTERS TO THE EDITOR

Summer 2007

by Hans Jensen

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Sir,
I would like to take issue with Jan Krzysztof Bielecki’s argument that freer markets rather than increased state expenditure will increase social cohesion. Empirical analyses in fact show that social cohesion is greatest in the Nordic welfare states that have a high level of social expenditure. I would therefore like to illustrate where Bielecki’s conclusions appear to be based on a misconception about the effects and synergies of public spending policies.

Bielecki claims that state pension favour richer people because on average they live longer than poor people. However, analysis of Danish models of the entire “life cycle” of public pensions has shown that the system does indeed redistribute income from the rich to the poor. The combination of basic contributions plus extra income-related charges ensures that a reasonable state-funded retirement can be provided to the poorest pensioners. Only a very clumsily constructed state pensions system would not generate these beneficial transfers.

Bielecki also argues that the majority of income transfers fail to reduce social inequalities because they occur within a country’s middle class. However, a big slice of this type of public income redistribution is connected to child care, e.g. through free state-funded day-care and maternity allowances. This targeted social expenditure allows women to participate in the labour market on an equal footing with men and therefore improves both social cohesion and gender equality, in addition to boosting labour supply in the national economy.

Bielecki favours less restriction on firing employees but ignores the connection between terms of employment and unemployment insurance. If no welfare safety net existed, the social partners would attempt to negotiate greater security for workers through agreements on longer notice periods, making it harder for employers to sack unwanted staff. Hence, there is a direct connection between public welfare services and more flexible employment practices.

The Danish trade union movement agrees with Bielecki that the free movement of labour and services is a good idea – but only in the longer term. Before a fair and open market for labour and services can be created, we must first ensure labour market transparency plus equal pay and working conditions for foreign and Danish workers. Equality is the only way to avoid social dumping, protect immigrant workers from being exploited by their employers and ensure that the Danes will not face unfair competition.

When discussing ways to benefit the poorest sections of our societies, it is always important to remember that reducing social expenditure often leads to a reduced quality of public services and lower social transfers. The Nordic welfare states, with their strong public sectors and relatively high rates of union membership, create a high degree of equality, strong social cohesion and resist social dumping in the labour market.