The Nordic welfare state: staying fit-for-purpose

There have been drastic changes to the political and economic climate since the inception of the Nordic welfare states in the twentieth century. Changes are required to meet the needs of today’s populations. People are less static than they once were; their roles both in and out of the job market change over time, and integration with the surrounding world’s economy and peoples influence national systems. Some academics within the Nordics view the welfare state as in crisis, while others believe that bold political choices can help the ‘model’ to adjust to new times.

2019.06.25 | Helena Kaarina Blomberg, Pauli Kettunen

Crowd of people

Support for the welfare state remains in the Nordics, even by those at the opposite ends of the political spectrum.

While commentators outside the Nordics like to cite the success of the welfare state, some academics within the Nordics view it as in crisis. As elsewhere, the Nordic countries face global challenges, such as, increasing inequality and populism. Issues such as these put the welfare model’s ability to recover from or tolerate disruptions to the test. Many academics agree that society has a duty to change and adapt over time and political decisions are required to make changes to services and the social security system. Three key issues which are often cited in support of necessary change to the status quo are:

  • An age­ing pop­u­la­tion:

It is difficult to discuss reforms to social welfare and healthcare services, social security and professional life, or policies concerning families, immigration and integration, without considering population ageing and the decreasing share of working-age people and children. Ageing populations lead to higher public spending and lower tax revenues, something which has an obvious impact on the funding base of welfare systems. Finland in particular is struggling with demographic changes. The country’s birth rate is decreasing, whereas in Norway and Sweden it is sustained by immigration. One suggested solution is that Nordic welfare states should invest in both the flexibility of family policies and professional life as well as in improving elderly care. This socially sustainable solution may conflict with what is economically sustainable, however.

An ageing population is frequently cited as a 'problem' for welfare states with incendiary terminology such as a 'ticking time bomb'. This approach does not make it easier to make the right political choices warn some commentators.

That said, some commentators warn against conceptualising demographic issues such as ‘dependency ratio’ and ‘sustainability gap’ in a simplistic way in the public discourse. Posing what is often conceived as a ‘problem’ and ‘solution’ overlooks that these issues are inextricably linked with political choices. When ageing people are perceived as a threat to the sustainability of the national economy or as an opportunity for lucrative service business, this has an impact on elderly people and how they are treated.

  • In­di­vidu­al­ising weakness and the revolution of the workplace and labour market:

The conception of people and their needs over their lifetime is different from when the welfare states were first devised. First of all, many people fluctuate between a range of roles during their lives, including those of employee, entrepreneur, a self-employed person, accumulator of personal skills and an unemployed person. Changes in working life have intensified the competition for jobs and weakened centralised ways of protecting the vulnerable used by the trade union movement, namely the restriction of competition by levelling out structural inequality. This is why structural weakness is difficult to recognise and reduce with the current protective methods being used, such as unemployment benefits based on paid employment.

In Finland, a controversial activation model for unemployment security was introduced in 2018, which is just one example of the incentives and obligations being used in various ways to influence individual behaviour. Picture: Front of a leaflet explaining Finland's activation policy in English, available www.te-palvelut.fi

Some academics recommend taking an approach which individualises weakness, focusing on the competitiveness, or otherwise, of each individual. This does not prevent the acknowledgement that those in a weaker position need protection. In the Nordic countries, incentives and obligations are used in various ways to influence individual behaviour. In Finland, for instance, a controversial activation model for unemployment security was introduced in 2018. A common trend in all Nordic countries is the current focus on individual behaviour. The combined effect of the individualisation of weakness and the changes to professional life are producing winners and losers, as well as those unable to take part at all. 

  • Outside influences:

The economy, labour market and governance have become increasingly global. This makes reconciling the traditional objectives of national welfare states more difficult – especially with the addition of global challenges relating to the environment and climate, as well as the increased mobility of people. As the movement of money, information, jobs and people across state borders has increased, the politics of nation states has become more focused on improving the competitiveness of society. National competitiveness increasingly frames political agendas, while demanding that welfare states are also attractive for players in the global economy. These demands may not always align with the demands typical of a welfare state, and there is a risk that domestic political and economic goals are preferred simply by virtue of their alignment with global competitiveness; even if a solution promotes the competitiveness of a country, it may no longer be socially or ecologically sustainable.

The importance placed on staying competitive with the outside world does not always align with the demands typical of a welfare state. Photo: Bowen Chin, Unsplash. 

Focusing more or less exclusively on competitiveness may lead to unforeseen consequences, disrupting the commencement of positive cycles for society in the future. These solutions are often unsatisfactory with respect to solving problems pertaining to, for example, democracy, citizenship, social equality and the ecological preconditions of society. With increasing frequency these questions are simultaneously local, national, European and global. For example, ecological sustainability permeates all political levels.

Support for the welfare state remains

The Nordic countries have shared certain goals and values inherent to the Nordic ‘ideal model’: equality, a certain type of universalism and the central role of work. Over time, values and goals have changed within and between these countries, but they form a shared foundation. Many studies indicate that the values of the Nordic model still enjoy broad support among the public. Political rhetoric also suggests that support is still strong for the welfare state; no political party in the Nordic countries can expect to gain wide support by declaring support for demolishing it. However, what people mean by ‘welfare state’ and its preservation differs widely. Its preservation is claimed by a variety of political actors as justification for different aims, for example:

  • representatives of business life demanding an improvement to competitiveness,
  • officials of the Ministry of Finance suggesting the reining in of national spending,
  • neoliberals demanding an extension of market economy practices to the public sector,
  • those invoking xenophobic threat scenarios and striving to close the borders,
  • social democrats and other traditional defenders of the welfare state for reasons of economic competitive advantage; social security and public services are perceived as social investments, as well as tools of risk sharing and management.
"Preserving the welfare state appears to be both an end that justifies the means and a means that justifies the end. It’s important to critically assess what is being preserved and how, and how the methods used will change and potentially even erode the welfare state."  states Professor Pauli Kettunen, University of Helsinki.

Academics in the area of social policy and politics, amongst other fields, wrestle with whether it is possible to make changes while fostering the values on which the Nordic welfare model has traditionally rested. Some are of the view that society has a duty to change and adapt over time and political choices determine how it is done.

The original elements of the welfare state, 1950s to 1970s

The welfare state was founded on the relationship between the weak and the strong in societal structures, particularly those related to work. The definition of protecting those in a weaker position came to encompass the levelling out of structural subordination and promoting equal citizenship through social welfare and educational policies, as well as a system of agreements concluded within the labour market.

Work has always occupied a key role in the Nordic welfare model, and the labour movement was a significant contributor in building the welfare state. The establishment of the welfare state promoted the formation of the wage labour society. Protecting the weak entailed the strengthening of workers’ status in the labour market and in the workplace, maintaining and improving the ability to work as well as protecting livelihoods in situations where people were unable to sell their labour. Labour relations are still heavily regulated with collective agreements concluded between employers and unions.

The establishment of the Nordic welfare state was supported by a widely shared trust in the ability of society to bring about self-reinforcing cycles of benefits and goals through compromise and planning. This kind of virtuous cycle linked together objectives associated with social equality, economic growth and expanding democracy. The strengthening of one sector also boosted the others: for example, the education and healthcare provided for all citizens through tax revenues produced a skilled and healthy workforce for the labour market. A growing economy, in turn, increased tax revenues.

The Nordic welfare states were founded on universalism denoting the equal right of citizens to social security and social services, such as education as well as social welfare and healthcare services. Certain social rights are still guaranteed free of charge by the state for its citizens.

This article is an adapted version of one that appeared in the Helsinki University newsletter ThinkLetter by Christa Liukas. 

Further reading:

  • P. Kettunen and K. Petersen, eds., Beyond Welfare State Models (Cheltenham, 2011). 

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