Welfare States, Labor Markets, Social Investment and the Digital Transformation

33 Pages Posted: 22 Jun 2020

See all articles by Werner Eichhorst

Werner Eichhorst

Institute for the Study of Labor (IZA)

Anton Hemerijck

Scientific Council for Government Policy, The Netherlands; Erasmus University Rotterdam (EUR)

Gemma Scalise

University of Bergamo


Barely having had the time to digest the economic and social aftershocks of the Great Recession, European welfare states are confronted with the even more disruptive coronavirus pandemic as probably, threatening the life of the more vulnerable, while incurring job losses for many as the consequence of the temporal "freezing of the economy" by lockdown measures. Befor the Covid-19 virus struck, the new face of the digital transformation and the rise of the 'platform' economy already raised existential questions for future welfare provision. The Great Lockdown - if anything - is bound to accelerate these trends. Greater automation will reinforce working from home to reduce Covid-19 virus transmission risks. At the same time, the Great Lockdown will reinforce inequality, as the poor find it more difficult to work from home, while low-paid workers in essential service in health care, supermarket retail, postal services, security and waste disposal, continue to face contagion risks. And although popular conjectures of 'jobless growth' and 'routine-biased' job polarization, driven by digitization and artificial intelligence, may still be overblown, intrusive change in the nature of work and employment relations require fundamental rethinking of extant labour market regulation and social protection. Inspired more by adverse family demography than technological change, social investment reform has been the fil rouge of welfare recalibration since the turn of the century. Is social investment reform still valid in the new era of 'disruptive' technological transformation in aftermath of Coronavirus pandemic that is likely to turn into the worst recession since the second world war? Empirically, this chapter explores how Germany, Italy and the Netherlands, in terms of the strengths and vulnerabilities of their labour market to digitization, together with their respective social investment aptitude, are currently preparing their welfare states for the intensification of technological change in the decade ahead.

Keywords: technological change, social investment, digital transition, Germany, Netherlands, Italy, COVID-19

JEL Classification: J21, J24, J42

Suggested Citation

Eichhorst, Werner and Hemerijck, Anton and Scalise, Gemma, Welfare States, Labor Markets, Social Investment and the Digital Transformation. IZA Discussion Paper No. 13391, Available at SSRN: https://ssrn.com/abstract=3631602 or http://dx.doi.org/10.2139/ssrn.3631602

Werner Eichhorst (Contact Author)

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072

Anton Hemerijck

Scientific Council for Government Policy, The Netherlands ( email )

The Hague NL-2500 EA
United States

Erasmus University Rotterdam (EUR)

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA

Gemma Scalise

University of Bergamo

Via Salvecchio, 19
Bergamo, 24129

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