From Social Protection to Social Investment: European Responses to Globalization, Technological Change, Labour Market Flexibilization, and Migration

Abstract

Globalization, technological change, and migration form three major challenges for European welfare states in the 21st century. These challenges are regarded as important sources of inequality on the labour market. Whereas the existing literature has mainly been focused on the sectors and occupations affected by globalization and technological change, the authors of this chapter argue that, via job polarization, these phenomena also affect the type of contract that workers have. They hypothesize that increased competition for low-paying jobs is associated with labour market flexibilization. Another major trend that they analyse is the free movement of labour. New data illustrate that labour migration from Central and Eastern European countries to Western European countries has grown slowly but substantially following recent enlargements of the Union. It has been considered a challenge for welfare states as it might contribute to feelings of economic insecurity and might erode solidarity, which forms the basis for the provision of social policy. Subsequently, the authors analyse how European welfare states have evolved over the past decades. They show that in spite of budgetary pressure stemming from globalization and migration, most countries have increased social expenditure. Furthermore, they analyse to what extent the focus has shifted from classical social protection to social investment policies to enable workers to adapt themselves to new labour market transformations. They contribute to the existing literature by covering years after the financial crisis for all EU member states and by demonstrating a novel way of correcting social expenditures for the number of recipients.

Keywords: globalization, technological change, job polarization, flexibilization, migration, social investment

JEL Classification: F16, F22, H52, H53