The Dynamics of Welfare Markets: Private Pensions and Domestic/Care Services in Europe (Work and Welfare in Europe) 3030566226, 9783030566227

Table of contents :
Acknowledgements
Contents
Editors and Contributors
Editors
Contributors
List of Figures
List of Tables
Part I: Mapping the Dynamics of Welfare Markets
1: Introduction: From the Emergence to the Dynamics of Welfare Markets
1.1 Introduction
1.2 Definition of Markets
1.3 Welfare Markets
1.4 Policy Instruments Structuring Welfare Markets
1.4.1 Financial Instruments
1.4.2 Regulatory Instruments
1.4.3 Informational Instruments
1.5 Outcomes of Welfare Markets
1.5.1 Productive Dimension
1.5.2 Allocative Dimension
1.5.3 Discursive Dimension
1.6 Actors, Agency, and Dynamics of Welfare Markets
1.7 Comparing Two Fields in European Welfare States
1.7.1 The Good/Service Exchanged
1.7.2 The Relation with State Policies
1.7.3 The Actors Involved
1.7.4 Uncertainty and the Time Horizon of Risks
1.8 Users, Employers, Firms, and Labour in the Dynamic (Re)construction of Welfare Markets
1.9 Main Contributions and Future Research Issues
1.9.1 The Resilience of Welfare Markets
1.9.2 Markets in Welfare in the Long Run: Families, Citizens, and the Welfare State
1.9.3 External Shocks and Dominant Actors
1.9.4 Exploring the Future of Welfare Markets
References
2: Changing States, Changing Citizens, Changing Politics?
2.1 Introduction
2.2 What Are Markets in the Welfare State?
2.3 What Political Dynamics Emerge from Welfare Markets?
2.4 The Electoral Domain: Citizens and the State
2.4.1 The Distribution of Risk (D1) and the Political Demands of Voters
2.4.2 Markets, Information, and Electoral Accountability (P1)
2.5 The Bureaucratic Domain: Producers and the State
2.5.1 Private Rents, Workplace Fissuring (D2)?
2.5.2 Mobilization and Political Influence (P2)
2.6 The Productive Domain: Citizens and Producers
2.7 Conclusion
References
3: The European Union and Multi-Level Contention over Welfare Marketization
3.1 Introduction
3.2 European Integration as a Catalyst of Marketization
3.3 The Contentious Outcomes of Welfare Marketization Across Europe
3.4 The Emergence of Multi-Level Contention over Welfare Marketization
3.5 Welfare Since the Great Recession: More Marketization, Less Europe-Wide Contention
3.6 Conclusion
References
Part II: (Re)constructing Welfare Markets
4: Welfare Markets and Home-Based Domestic/Care Services: Market Dynamics and Mechanisms in Two Different Institutional Contexts—Spain and Sweden
4.1 Introduction
4.2 Institutional Configurations and Welfare Markets
4.2.1 The Contours of Welfare Markets in Home-Based Services
4.2.2 Expansion in Welfare Markets
4.3 Policy Choices and Market Governance
4.3.1 Sweden: Regulating the Market Through Tax Subsidies
4.3.2 Spain: Regulating the Market Through Legislation
4.4 How Markets Work in Practice
4.4.1 Users: Demand, Affordability and Access
4.4.2 Migrant Workers
4.4.3 Stratification
4.4.4 Working Conditions
4.4.5 Employers: Governance and Legitimacy
4.4.6 Potential for Change: Trade Unions and Grass Roots Mobilization
4.5 Discussion
References
5: The Failure of a Welfare Market: State-Subsidized Private Pensions Between Economic Developments and Media Discourses
5.1 Introduction
5.2 Definition and Measurement of the Failure of a Welfare Market
5.3 Legislation Doesn’t Matter: The Ineffectiveness of Reforms
5.4 It’s the Economy? Interest Rates and the Stagnation of the Welfare Market
5.5 Discourse Follows Economics? The ‘Inefficiency Turn’ in the Policy Discourse
5.6 The Political Adherence to a Failed Welfare Market
5.7 Summary
References
6: The Role of Evidence and Commissions in the Dynamics of German and Swedish Pension Markets
6.1 Introduction
6.2 State-of-the-Art
6.2.1 Evidence-Based Policy-Making
6.2.2 Government Commissions
6.3 Dynamics of Pension Markets
6.3.1 Germany
6.3.2 Sweden
6.3.3 Comparison
6.4 Data Structure and Political Institutions in the Re-regulation of Welfare Markets: Evidence and Commissions
6.4.1 Evidence and Data
6.4.2 Pension Commissions
6.5 Conclusions
References
Part III: The Dynamics on the User Side
7: ‘Disorientation’ in a Capricious Welfare Market: The Case of the German Pension System
7.1 Introduction
7.2 Disorientation and the Planning of the Future
7.3 The German Pension System and Its Evolving Welfare Market
7.4 The Experience of Disorientation: Empirical Insights
7.4.1 Research Design and Methodology
7.4.2 Results
7.5 Conclusions
References
8: Being Dependent and an Employer: The Realities of Private Individual Employment for Dependent Elderly People in France
8.1 Introduction
8.2 The Dynamics of the Domestic/Care Service Markets in France: A Hazy Market for Elderly People
8.3 Being an Employer: A Role Shared with Others
8.4 The Unequal Preparation of the Elderly to Cope with the Role of Employer
8.5 Facing Labour Conflicts: Learning by Doing?
8.6 Conclusion
References
9: The Political Dynamics of Welfare Markets: The Emergence of Consumer Organisations in the Field of Social Policy
9.1 Introduction
9.2 Welfare Markets in Germany: The Making of Consumers
9.3 Methodology: Public Hearings and Consumer Associations
9.4 Results
9.4.1 The Committee for Labour and Social Affairs
9.4.2 The Committee for Health
9.4.3 Long-Term Care Insurance
9.4.4 Explaining the Development
9.5 Conclusion
References
Part IV: The Dynamics of Firms and Employers
10: The Politics of the Segmentation and De-segmentation of the French Market for Private Retirement Accounts
10.1 Introduction
10.2 French Private Retirement Accounts: A Traditionally Segmented Welfare Market
10.3 Late 1970s and Early 1990s: Blocked Attempts to Create a New Welfare Market for Private Pensions
10.3.1 A Stillborn Retirement Savings Product: The Chirac Government’s PER
10.3.2 Trade Unions’ and Business Groups’ Bones of Contention over Private Retirement Accounts
10.4 Late 1990s and Early 2000s—Reform Through Segmentation
10.4.1 Another Stillborn Product: Right-Wing Parliamentarians’ PER
10.4.2 From the Left-Wing PPESV to the Right-Wing PERCO and PERP
10.5 After 2008: Towards a Reregulation and Liberalisation of the Private Pensions Market
10.6 Conclusion
References
11: The Development of Occupational Pension Markets in the European Union and in Lithuania: Regulation and Challenges
11.1 Introduction
11.2 The Debate over the Interactions Between Statutory Mandatory Pension Guarantees and Private Pensions in the Welfare Market
11.3 The Regulation of the Occupational Pension Market in European Union Law
11.4 Expansion of Occupational Pension Markets in EU Member States
11.5 Implementation of the Occupational Pension Market in Lithuania and Its Limits
11.6 Conclusions
References
12: Becoming an Organised Actor in a Welfare Market: Employers in the French In-Home Domestic/Care Services Sector
12.1 Introduction
12.2 Interrelated Dynamics Between the Policy Instruments Organising Welfare Markets and Sectoral Employers’ Organisations
12.2.1 The Dynamics of Policy Instruments Organising the Welfare Market
12.2.2 The Dynamics of For-Profit Employers’ Organisations
12.3 From the Creation of an Employers’ Organisation Representing For-Profit Firms to the Development of Welfare Market Policies
12.3.1 When Welfare Market Policies Attract the Interest of the Existing Employer’s Associations
12.3.2 Battles Within the Employers’ Confederation
12.4 Repertoires of Action Developed by the Organisations Representing Home Services Firms
12.4.1 Lobbying and Influencing the Legislature to Expand a Producer-Dominated Market
12.4.2 Organising Firms
12.4.3 Using Legislative Architecture to Liberalise Welfare Markets for Home Services
12.4.4 Becoming a Representative Actor Able to Negotiate a National Collective Agreement
12.5 The Outcomes: The Construction of New Actors
12.5.1 The Dynamics of Welfare Market Policies: The Success of Employers’ Organisations
12.5.2 The Spread of For-Profit Firms
12.6 Conclusion
References
Part V: The Dynamics on the Labour Side
13: Informalisation of Work and Workers’ Voice in Welfare Markets for In-Home Domestic/Care Services in Germany
13.1 Introduction
13.2 Labour Market Developments and Employment Risks
13.2.1 The Dynamics of Employment in Welfare Markets for Childcare
13.2.2 Labour in Welfare Markets for Elderly Care
13.2.3 Employment Created by Outsourcing Domestic Labour
13.3 Informalisation of Work and Workers’ Voice
13.3.1 Worker Responses in Care Facilities
13.3.2 Worker Responses Towards Risks Related to Work in Private Households
13.4 Conclusion
References
Interviews
14: Trade Unions and Welfare Markets: Comparing Dynamics in Three Domestic/Care Markets in the Netherlands
14.1 Introduction
14.2 Three Dutch Domestic/Care Services Markets
14.2.1 Reforms and Policy Instruments: Increased Competition and Private Provision
14.2.2 Users, Providers and Workers
14.3 Trade Unions and the Dynamics of Domestic/Care Markets
14.3.1 Trade Union Opposition to Market Reforms in the 2000s
14.3.2 Changes in Trade Union Strategies in Domestic/Care Markets
14.4 Conclusion
References
15: Workers on Welfare Markets and the Appropriation of Their Rights: The Case of Mothers’ Assistants in France Since 1977
15.1 Introduction
15.2 1972–2004: New Rights, but Without the Social Power to Assert Them
15.2.1 Home-Based Childcare Regulated by the State Since 1977
15.2.2 Financial Incentives to Integrate Mothers’ Assistants into the Formal Labour Market
15.2.3 Workers Still Lack Social Clout for Asserting Their Rights in Daily Care Work
15.3 Since 2004: The Increasing Juridification of the Home Childcare Market
15.3.1 A Written Employment Contract and the Right to an Hourly Wage
15.3.2 Mothers’ Assistants Asserting Their Rights vis-à-vis Parents as Their Employers
15.3.3 Behind Juridification: Many Formal and Informal Interventions
15.4 Conclusion
References
Correction to: Introduction: From the Emergence to the Dynamics of Welfare Markets
Index

Citation preview

WORK AND WELFARE IN EUROPE

The Dynamics of Welfare Markets Private Pensions and Domestic/Care Services in Europe Edited by Clémence Ledoux · Karen Shire Franca van Hooren

Work and Welfare in Europe

Series Editors Ana Guillén Rodriguez University of Oviedo Oviedo, Spain Daniel Clegg University of Edinburgh Edinburgh, UK Nathalie Morel Sciences Po Paris, France

Welfare reform in Europe faces an uncertain future. This series provides the essential data and analysis that scholars need to understand and debate current developments in work and welfare and to evaluate future trajectories of care-work, poverty, activation policies, retirement and work-life balance’ - Professor Peter Taylor-Gooby, University of Kent, UK. More information about this series at http://www.palgrave.com/gp/series/14386

Clémence Ledoux  •  Karen Shire Franca van Hooren Editors

The Dynamics of Welfare Markets Private Pensions and Domestic/Care Services in Europe

Editors Clémence Ledoux University of Nantes Nantes, France

Karen Shire University of Duisburg-Essen Duisburg, Germany

Franca van Hooren University of Amsterdam Amsterdam, The Netherlands

Work and Welfare in Europe ISBN 978-3-030-56622-7    ISBN 978-3-030-56623-4 (eBook) https://doi.org/10.1007/978-3-030-56623-4 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2021 , corrected publication 2021 Chapter 1 is licensed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/). For further details see licence information in the chapter. This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and ­transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Acknowledgements

This volume brings together a group of sociologists, political scientists, and jurists from nine countries, most of whom met several times as members of a study group at the Hanse-Wissenschaftskolleg—Institute for Advanced Study (HWK) in Delmenhorst, Germany, between 2016 and 2018. We would like to extend our thanks to the HWK for giving us the time for in-depth discussions in a tremendously beautiful and relaxing environment. The meetings at the HWK allowed us to think beyond our own disciplinary boundaries and extend our national scientific frontiers. We are particularly grateful to Susanne Fuchs and Wolfgang Stenzel at the HWK for their encouragement and trust, and Christina Thiel, who supported the organisation of the workshops with great patience. The editors of this volume would also like to express our deepest gratitude to all the participants in these workshops, who gave us the energy to begin this book project, continued to engage with us in the analysis of the dynamics of welfare markets through several drafts of the manuscripts, and inspired us in their efforts to complete this volume. You have made the editing of this book a pleasant process! We are indebted to Patrick Aspers, University of St. Gallen, who shared his theories of markets with us and helped us to formulate the concept of welfare markets we employ in this volume. We also thank Karin Gottschall, University of Bremen, with whom we discussed many of the concepts and approaches presented v

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in this book both at and outside of the HWK workshops. We also thank Gabrielle Meagher, Macquarie University, for reading much of the final manuscript at short notice and providing valuable feedback. Some of us also joined the World Congress of the International Sociological Association and the International Conference of Europeanists of the Council for European Studies over the life course of the HWK study group. These meetings allowed us to jointly improve our understanding of the dynamics of welfare markets and to receive valuable comments from international scholars. Research does not happen without institutional resources and funding. We would like to thank the productive research environment provided to us by our home institutions: the research laboratory Droit et Changement Social (DCS) and the Centre Nantais de Sociologie (CENS) at the University of Nantes, the Political Science Department at the University of Amsterdam, the Netherlands Institute for Advanced Studies in Amsterdam, and the Essen College for Gender Research at the University of Duisburg-Essen. Further support was given to us by the French National Research Agency (Research Project PROFAM, ANR-17-CE26-0019), allowing us to fund support staff, which was of great assistance in producing the final manuscript. Since English is not the mother tongue of all the contributors to this book, we are especially grateful for the help we received from colleagues who are able to express themselves in the language of Shakespeare: Eric Marlow, Juliette Rogers, and Joanne Walker. Katia Barragan from DCS corrected the reference formats and Eric Marlow followed us through all the steps of editing and compiling of files into a final manuscript. They both saved us precious time! Lastly, we are grateful to the editors of the Work and Welfare series at Palgrave Macmillan, especially to Denis Bouget, who supported our book project from its inception to the end, taking the time to read every chapter carefully, providing detailed comments, which much improved the final manuscript. Many thanks to the editorial team at Palgrave, Sharla Plant and Poppy Hull, whose guidance and patience kept us moving forward as we and our contributors struggled to complete this volume from home offices, and in a world shaken by the Covid-19 pandemic.

Contents

Part I Mapping the Dynamics of Welfare Markets   1 1 Introduction: From the Emergence to the Dynamics of Welfare Markets  3 Clémence Ledoux, Karen Shire, and Franca van Hooren 2 Changing States, Changing Citizens, Changing Politics? 51 Jane Gingrich 3 The European Union and Multi-Level Contention over Welfare Marketization 79 Amandine Crespy Part II (Re)constructing Welfare Markets 103 4 Welfare Markets and Home-Based Domestic/Care Services: Market Dynamics and Mechanisms in Two Different Institutional Contexts—Spain and Sweden105 Zenia Hellgren and Barbara Hobson

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5 The Failure of a Welfare Market: State-­Subsidized Private Pensions Between Economic Developments and Media Discourses133 Frank Nullmeier 6 The Role of Evidence and Commissions in the Dynamics of German and Swedish Pension Markets163 Stephan Köppe Part III The Dynamics on the User Side 189 7 ‘Disorientation’ in a Capricious Welfare Market: The Case of the German Pension System191 Ingo Bode and Ralf Lüth 8 Being Dependent and an Employer: The Realities of Private Individual Employment for Dependent Elderly People in France217 Eve Meuret-Campfort 9 The Political Dynamics of Welfare Markets: The Emergence of Consumer Organisations in the Field of Social Policy241 Florian Blank Part IV The Dynamics of Firms and Employers 265 10 The Politics of the Segmentation and De-segmentation of the French Market for Private Retirement Accounts267 Marek Naczyk

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11 The Development of Occupational Pension Markets in the European Union and in Lithuania: Regulation and Challenges293 Audrius Bitinas 12 Becoming an Organised Actor in a Welfare Market: Employers in the French In-Home Domestic/Care Services Sector319 Clémence Ledoux, Rafael Encinas de Muñagorri, and Virginie Guiraudon Part V The Dynamics on the Labour Side 345 13 Informalisation of Work and Workers’ Voice in Welfare Markets for In-Home Domestic/Care Services in Germany347 Birgit Apitzsch and Karen Shire 14 Trade Unions and Welfare Markets: Comparing Dynamics in Three Domestic/Care Markets in the Netherlands373 Franca van Hooren 15 Workers on Welfare Markets and the Appropriation of Their Rights: The Case of Mothers’ Assistants in France Since 1977401 Marie Cartier  Correction to: Introduction: From the Emergence to the Dynamics of Welfare Markets C1 Clémence Ledoux, Karen Shire, and Franca van Hooren Index425

Editors and Contributors

Editors Clémence Ledoux  (PhD, 2011, Sciences Po Paris) is Assistant Professor of Political Science at the University of Nantes, France and former fellow of the Hanse-­Wissenschaftskolleg (HWK) in Delmenhorst (Germany). Her work concentrates on the dynamics of the home-based service sector in France and Germany. In 2015, she co-published with Virginie Guiraudon, “The politics of tax exemptions for home services: beyond sociodemographic explanations”, in Clément Carbonnier and Nathalie Morel (eds.), The political economy of domestic service in Europe, Palgrave, London; she recently authored “De la régulation politique des mondes de l’état Providence à celle des mondes professionnels. Le cas du care et des services domestiques” in the Revue Française de Science Politique, 2018. Karen Shire  (PhD, 1990, University of Wisconsin-Madison) is Professor of Sociology and Japanese Society at the University of Duisburg-Essen (Germany), where she also directs the Essen College for Gender Research. She is a member of the faculty of the International Max Planck Research School on the Social and Political Constitution of the Economy and former fellow of the Hanse-Wissenschaftskolleg (HWK) in Delmenhorst xi

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(Germany). Her recent publications include Family Supports and Insecure Work: The Politics of Household Service Employment in Conservative Welfare Regimes (Social Politics, 2015) and The Origins and Transformation of Conservative Gender Regimes in Germany and Japan (with K. Nemoto, 2020, Social Politics). Franca van Hooren  (PhD, European University Institute) is an Assistant Professor at the Political Science Department of the University of Amsterdam, the Netherlands, and former fellow at the Netherlands Institute of Advanced Studies. Her work concentrates on care/domestic work policies, trade unions mobilisations and intersectionality in a comparative perspective. Her dissertation work was about the growing role of migrants in social care in Europe and she co-authored several articles and a monograph on the impact of economic crisis on the welfare state. Her recent publications include Intersecting Social Divisions and the Politics of Differentiation: Understanding Exclusionary Domestic Work Policy in the Netherlands (2018, Social Politics) and co-author of The Governmentalization of the Trade Union and the Potential of Union-­ Based Resistance: The Case of Undocumented Migrant Domestic Workers in the Netherlands (2018 Social & Legal Studies) (www.franvavanhooren.info).

Contributors Birgit Apitzsch  is senior researcher at the Sociological Research Institute (SOFI) at the University of Göttingen, Germany. Her areas of research are the sociology of work, organizations and labour markets, industrial relations, institutional theory and the sociology of law. Recent research centres on the consequences of informalized and non-standard employment with a focus on regulation and institutional change and on the sociology of professions and service work. Audrius Bitinas  is researcher at the Faculty of Law at Vilnius University, Lithuania. His scientific research interests include social security and

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labour law, European Union and international social law, the development of public management and welfare states analysis. Florian  Blank  is senior researcher at the Institute of Economic and Social Research (WSI) at the Hans-Böckler-Foundation, Düsseldorf, Germany. His work focuses on social policy, especially systems of social insurance in Germany and Austria. He has written on the development of the German welfare state, occupational welfare, and welfare markets. Ingo Bode  is Professor of Social Policy, Society and Organization at the Institute of Social Work and Social Welfare at the University of Kassel, Germany. His areas of work include the analysis of marketization in social welfare provision, evolving organizational settings in social care and healthcare sectors, and developments in the public management of contemporary welfare states, including from a comparative perspective. Marie  Cartier  is Professor of Sociology at the University of Nantes (France) and head of the research unit Centre Nantais de Sociologie (CENS). She adopts an ethnographic and historical approach to studying low-paid jobs in the service sector. Her research emphasizes the role of legal regulation on the condition of the working class. Together with Y. Siblot, I. Coutant, and O. Masclet, she recently authored The LittleMiddles’ France: A suburban housing development in greater Paris (Berghan, 2016). Amandine  Crespy is Associate Professor of Political Science and European Studies at the Free University of Brussels (ULB), Belgium, and visiting professor at the College of Europe (Bruges). Her research deals with the politicization of EU integration and socio-economic policies. She has authored Welfare Markets in Europe (Palgrave, 2016), L’Europe sociale. Acteurs, politiques, débats (Presses de l’Université de Bruxelles 2019) and she is the co-editor of Governance and Politics in the Post-crisis European Union (CUP, 2019). Rafael Encinas de Muñagorri  is Professor of Private Law, Laureate of the National Agrégation for University Professorship of Private Law and

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Criminal Sciences, and former visiting research fellow at Harvard University (1998). He is Director of the research unit Law and Social Change (DCS) at the University of Nantes, France. He has recently authored papers on labour law reforms in Europe and on transnational social dumping. Jane Gingrich  is Associate Professor of Comparative Political Economy at the University of Oxford, United Kingdom. She has written on contemporary restructuring of the welfare state, market-oriented reforms in state services, and the politics of institutional change. She authored Making Markets in the Welfare State: The politics of varying market reforms, Cambridge University Press (2011) and is undertaking an European Research Council-funded project on the politics of education. Virginie  Guiraudon is Centre National de la Recherche Scientifique (CNRS) Director of Research at Sciences Po Paris, France, and recipient of the 2013 Mattei Dogan prize in European Political Sociology. Her research focuses on comparative policy processes in the context of EU integration. Her research on migration-related policies has long intersected with scholarship on the transformations of the welfare state. Together with C. Martin, she recently co-authored “Drivers for Change” in B. Greve (ed.) The Routledge Handbook of the Welfare State (2018). Zenia  Hellgren is Doctor of Sociology from Stockholm University, senior researcher and currently Marie Curie Research Fellow at GRITIMUPF/Pompeu Fabra University, Spain. In her research, she focuses mainly on the situation of immigrants and ethnic minorities in terms of inclusion/exclusion, precarious work, discrimination, and opportunities. Her works have been published in numerous academic journals and edited volumes (https://www.upf.edu/web/zenia-hellgren). Barbara  Hobson is Emeritus Professor of Sociology at Stockholm University, Sweden, and was research fellow at the Institute for Advanced Study in Berlin, Germany from 2017 to 2018. She has written numerous books and articles on gender, work, family, citizenship, and diversity in welfare states. Her research concerns the reconfiguration of states, mar-

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kets, and families/households in welfare states. She is the founder and editor emerita of Social Politics (Oxford University Press). Stephan Köppe  is Assistant Professor of Social Policy at the University College Dublin, Ireland, co-director of the Master of Public Policy and fellow at the Geary Institute for Public Policy. His work focuses on the politics, inequalities, and business interests in private welfare schemes. He has written on private pensions, schools, intergenerational transfers, and housing wealth and teaches comparative social policy, public policy, and mixed methods. Clémence  Ledoux is Assistant Professor of Political Science at the University of Nantes, France. She is a former fellow of the HanseWissenschaftskolleg (HWK) in Delmenhorst, Germany. Her work concentrates on the dynamics of the home-based service sector in Europe and, more recently, on the role of employers’ organisations and streetlevel bureaucrats in the structuring of this sector. Ralf  Lüth  is doctoral researcher at the Institute of Social Work and Social Welfare at the University of Kassel, Germany, and lectures on social policy. Focusing on the effects of welfare state institutions on individual standards of living, he is preparing a PhD on the non-take-up of means-tested benefits in contemporary Germany. Eve Meuret-Campfort is CNRS Researcher at the Center for Sociological and Political Research in Paris (CRESPPA), France. Her work focuses on the sociology of labour and activism in female occupations (clothing industry, childcare centres, and domestic elderly care). She also contributed to a collective research project on the history of feminism in the 1970s, especially regarding its relations with working-class women. Marek  Naczyk  is Associate Professor of Comparative Social Policy at University of Oxford, United Kingdom. His research is at the crossroads of social policy, comparative political economy, and international political economy. He is a graduate of Sciences Po Paris and received his PhD in politics from the University of Oxford. His recent work is published in

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the British Journal of Industrial Relations and the Journal of European Public Policy. Frank Nullmeier  is Full Professor of Political Science at the University of Bremen, Germany. He is Head of the Theoretical and Normative Foundations Department at the SOCIUM Research Centre on Inequality and Social Policy. His fields of research include social policy analysis, welfare state theory, and issues of political legitimation. He is co-editor of The Oxford Handbook of Transformations of the State (2015). Karen Shire  is Chair for Comparative Sociology and Japanese Society and director of the Essener College for Gender Research, University of Duisburg-Essen, Germany, and a faculty member of the International Max Planck Research School on the Social and Political Constitution of the Economy in Cologne, Germany. She researches the transformation of employment, new social risks, labour markets, and complex inequalities in inter-regional comparisons of Europe and East Asia. Franca  van Hooren  is Assistant Professor of Political Science at the Political Science Department at the University of Amsterdam, the Netherlands. She is former fellow of the Netherlands Institute for Advanced Studies. Her work concentrates on care/domestic work policies, trade unions mobilisations and intersectionality in a comparative perspective.

List of Figures

Fig. 2.1 Fig. 2.2 Fig. 2.3 Fig. 2.4 Fig. 2.5 Fig. 4.1 Fig. 4.2 Fig. 5.1 Fig. 5.2 Fig. 5.3 Fig. 5.4 Fig. 5.5 Fig. 5.6 Fig. 5.7

Secondary education in 2010 53 Configurations of public and private financing in health, 2010 54 Fiscal welfare across the OECD 55 Over time developments in fiscal welfare 56 States, citizens, and producers 58 Proportion of natives and immigrant women working in the care/domestic sector in Spain and Sweden 109 Increase in the number of Swedish companies in the cleaning sector 2003–2016 112 Growth in the Number of Riester pension plans (2000–2018)138 Policy discourse, expert arenas, and the general public 146 Development of positive and negative statements about Riester pension plans from 2005 to 2016 147 Arguments supporting Riester pension plans (Die Welt, SZ) from 2005 to 2016 148 High versus low return statements (Die Welt, SZ) from 2005 to 2016 149 Three types of criticism (Die Welt, SZ) from 2005 to 2016 150 Distribution of all positive statements from 2005 to 2016 (Die Welt, SZ) 151

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List of Figures

Fig. 5.8

Distribution of all negative statements from 2005 to 2016 (Die Welt, SZ) 152 Knowledge and planning concerning future retirement provision203 Anxiousness regarding personal standard of living, percentages206 Number of children receiving childcare subsidy by type of care in the Netherlands, 2007–2017 378 Employees in childcare in the Netherlands, 2003–2019 380 Members and membership rate of biggest trade union in childcare in the Netherlands 385 Members and membership rate of biggest trade union in long-term care (home-based and residential) in the Netherlands386

Fig. 7.1 Fig. 7.2 Fig. 14.1 Fig. 14.2 Fig. 14.3 Fig. 14.4

List of Tables

Table 1.1 Table 1.2 Table 3.1 Table 5.1 Table 5.2 Table 6.1 Table 6.2 Table 6.3 Table 6.4 Table 6.5 Table 7.1 Table 7.2 Table 7.3 Table 7.4 Table 9.1 Table 9.2

Policy instruments structuring welfare markets 10 The outcomes of welfare markets 16 EU liberalization directives in welfare sectors 83 Development of the number of Riester pension plans (in thousands)137 Reforms of the German Riester pension 2004–2018 142 Reforms of the German Riester pension 171 Swedish pension market in 2000 175 Reforms of the Swedish premium pension 176 Pension commissions in Germany and Sweden 182 Swedish government commissions with a mandate for the premium pension annually, 2000–2018 183 Sources of expected retirement income 204 Expected substitution rates 205 Anxiousness regarding personal standard of living— multivariate regression 206 Trust in institutions—multivariate regression 207 Overview of parliamentary election periods (Wahlperiode) 1990–2017250 Invitations to consumer associations by the Committee for Labour and Social Affairs: 1990–2017 253

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Table 9.3 Table 9.4 Table 10.1 Table 12.1 Table 12.2 Table 12.3 Table 13.1 Table 13.2 Table 13.3 Table 13.4 Table 14.1

Invitations to consumer associations by the Committee for Health, 1990–2017 254 Legislation on long-term care insurance: selection of acts based on Steffen (2019) 256 Main types of fully funded schemes 274 Policy instruments for home services welfare markets in France, in 2020 323 Employers’ organisations in in-home domestic/care services in France, in 2020 327 The Dynamics of the welfare market structure for in-home domestic/care work in France 341 Size of the childcare labour force by type of facility, 2006–2019352 Estimated size of the informal and formal care labour force by type of care service (2005–2017) 355 Shares of work force in public, non-profit, and private long-term care service enterprises (2005–2017) 357 Mini jobs in private households, numbers, shares of women and migrants 358 FNV union membership in October 2015 384

Part I Mapping the Dynamics of Welfare Markets

1 Introduction: From the Emergence to the Dynamics of Welfare Markets Clémence Ledoux, Karen Shire, and Franca van Hooren

1.1 Introduction Since the 1980s, ideologies orienting welfare reforms in many European countries support replacing state provision with market-based and private provision of welfare (Taylor-Gooby 1998). Despite over 30 years of The original version of this chapter was revised. The correction to this chapter can be found at https://doi.org/10.1007/978-3-030-56623-4_16

C. Ledoux (*) University of Nantes, Nantes, France e-mail: [email protected] K. Shire University of Duisburg-Essen, Duisburg, Germany e-mail: [email protected] F. van Hooren University of Amsterdam, Amsterdam, The Netherlands e-mail: [email protected] © The Author(s) 2021, corrected publication 2021 C. Ledoux et al. (eds.), The Dynamics of Welfare Markets, Work and Welfare in Europe, https://doi.org/10.1007/978-3-030-56623-4_1

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such reforms, welfare states have far from disappeared. Instead, the role of the state and the nature of welfare policies have changed. Welfare states have developed competition, separated the functions of providing and funding welfare goods and services (Le Grand 1991), created and subsidized the development of markets, and imbued them with welfare goals (Nullmeier 2001; Bode 2008; Gingrich 2011; Köppe 2015; Pieper 2018), examples of which range from the development of school vouchers (Köppe 2015) to cash for eldercare schemes (Ungerson and Yeandle 2007; Da Roit and Le Bihan 2010; Ranci and Pavolini 2013), tax incentives for the payment of household services (Carbonnier and Morel 2015), housing support (Pollard 2011), and private pensions (Hacker 2004; Ebbinghaus 2011). With the establishment of market mechanisms within public policies, social policies, ironically, use these to protect against market risks (Köppe 2015), and contrary to Esping-Andersen’s original claims, social politics no longer appear against markets (Esping-­ Andersen 1985), but instead with markets (Leibfried and Obinger 2000; Pieper 2018). The concept of welfare markets, rather than being an oxymoron, has been adopted to characterize these transformations and to go beyond the opposition between market/non-market spheres in the analysis of the different interpenetrations between market mechanisms and welfare states (Bode 2008; Gingrich 2011). The contributors to this volume agree on a definition of welfare markets as politically shaped, regulated, and state-supported markets, which provide social goods and services through the competitive activities of non-state actors. We begin to build a conceptual basis for studying the dynamic development of welfare markets by drawing on research in the sociology of markets and political economy focused on the emergence of market structures generally (Beckert 2009; Aspers 2011; Ahrne et al. 2015), and adapting these perspectives to the specific dimensions shaping welfare markets. From these perspectives, market making is a dynamic process, involving not only top-down policies and rules, but also changes in normative understandings of the meaning of what is exchanged, and agreements on how markets work. The aim of this book is to examine these dynamics, in relation to how European welfare markets have developed since the 1990s. We do so from an explicitly actor-centred perspective, focusing not only on the state and private sector (including profit and non-profit organizations), domains of action which are in part already well covered in the

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welfare market literature, but also on the perspectives of consumers, users,1 and, where applicable, workers delivering services exchanged in welfare markets. Though in all cases, new policies are highly significant events in the creation of welfare markets, a central thesis of the contributions to this book is that welfare markets develop not only out of state policies, but are also significantly shaped by the practices of welfare recipients, who are often transformed into consumers of private goods and services, and by workers and their employers in the emerging welfare service industries. The contributions in this volume aim at filling the gap in understanding welfare market dynamics through an action-centred approach to welfare marketization as a process of institutional change. Following Mahoney and Thelen (2010), we emphasize how the way in which state policies are implemented and interpreted by actors involved in the market exchange of welfare contributes to layering welfare markets onto existing welfare institutions, or to displacing earlier forms of state or other types of welfare provision. The analysis of the dynamics of welfare markets focuses on continental and Scandinavian European countries, which began to legislate welfare market instruments in the 1990s, later than most countries classified as liberal-market welfare states. Two cases of welfare markets comprise the empirical focus: private pensions and home-based domestic/care work (see below for an elaboration of our choice of cases). The analysis covers multiple levels of European and national polities and markets, and the impact of cross-national differences in welfare states on market dynamics, covering countries often classified as conservative or familial welfare states, as well as social-democratic, and Eastern European welfare states. The breadth of country cases and types of welfare states contributes to analysing regional differences in welfare market dynamics. This introductory chapter begins with an interrogation of the nature of markets in general (Sect. 1.2) before analysing the specificities of welfare markets (Sect. 1.3), the instruments which structure them (Sect. 1.4), and their outcomes (Sect. 1.5). We then discuss the theoretical significance of new sets of actors, and their agency for the dynamics of welfare markets (Sect. 1.6), the two fields of private pensions and home-based domestic/care services (Sect. 1.7) and finish with the contributions of each of the chapters (Sect. 1.8) and the knowledge generated by this volume for understanding the dynamics of welfare markets outside of the traditionally liberal-market welfare states (Sect. 1.9).

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1.2 Definition of Markets Markets have been defined very differently across economics and the social sciences. We draw on the new sociology of markets, which defines a market as a social interaction which produces “a social structure for the exchange of rights in which offers are evaluated and priced, and compete with one another, which is shorthand for the fact that actors – individuals and firms – compete with one another via offers” (Aspers 2011, p. 4). This definition highlights the competitive nature of market exchanges, thus defining markets as present, in the words of Max Weber, “wherever there is competition, even if only unilateral, for opportunities of exchange among a plurality of potential parties” (Weber 1978, p.  635). Market exchanges may involve individual or organized actors and are distinguished further by their voluntary nature. Market exchanges can “transcend the boundaries of neighbourhood, kinship, or tribe” and give the possibility for people who did not know each other before to buy and sell goods or services (Weber 1978, p. 637). Herein lies the source of uncertainties in market exchanges, which must be solved in order to establish a stable market order (Beckert 2009; François 2008; Aspers 2011). As Beckert (2009) argues, the competitive and voluntary nature of markets presents market actors with coordination problems, which actors eventually seek to solve through embedding exchanges in (non-market) macro-­ structures. These structures include formal and informal institutions which take the form of rules, norms, and shared understandings of what a market is about and how it works (see also Fligstein 2001; Aspers 2011). Market uncertainties are not solved in a day, if ever. Aspers introduces a dynamic concept of markets, differentiating between ways in which markets are created, and stages through which they develop, possibly ending in a consolidated market, but also possibly failing (Aspers 2011; Ahrne et al. 2015). In the market theory of Fligstein (2001), markets are established through political struggles between market actors, who eventually align their interests and develop shared cultural understandings about the market. The development of a market culture is also central to Aspers’ dynamic theory of markets, as he sees the establishment of a market culture as the development of a common understanding about what the market is about, and how things are done in a specific market (Aspers

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2011). The sociology of markets also points to the need for shared understandings about what is commodified, that is, about which objects can be legitimately produced for sale (Engels 2009). Once objects are produced for sale, a number of issues remain in determining their value, a process rendering them comparable to other objects and exchange currencies (Beckert 2009; Engels 2009). Welfare markets do not arise spontaneously but are organized, and almost by definition, state-organized and publicly governed. From a sociological perspective, which always sees markets as embedded in macro-­ structures and institutions (in the form of rules, norms, and shared understandings), the public governance of welfare markets is not unusual. Shifting the focus of research to the dynamics of markets does, however, raise the question of how welfare markets, once initiated through state policies, develop through the agency of market actors. In the next section, we focus on the specificities of the market exchange of welfare and begin to outline the specific goals of this volume in studying the dynamics of welfare markets.

1.3 Welfare Markets Welfare markets have introduced “competitive spheres in the institutional provision of social welfare” (Bode 2008). Over the last 30 years, European welfare states have turned increasingly to market mechanisms for the provision of welfare. Local, national, and/or European political authorities contributed to different policy instruments to generate competition, and to create and regulate these markets (Bode 2008; Gingrich 2011; Köppe 2015; Crespy 2016; Crespy, Chap. 3; Bitinas, Chap. 11). Previous research pointed to the emergence of quasi-markets (Le Grand 1991), where the state becomes “a funder, purchasing services from a variety of private, voluntary and public providers, all operating in competition with one another” (Le Grand 1991, p. 1257). Our conceptualization of welfare markets overlaps partly with Le Grand’s understanding of quasi-­ markets, but there are also key differences. By defining welfare markets as politically shaped, regulated, and state-supported markets, which provide social goods and services through the competitive activities of non-state

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actors, we exclude those forms of quasi-markets that consist only of competition of the new public management type, within and between state organizations. Instead, our focus is on markets involving non-state and private actors. Contrary to the quasi-markets concept, welfare markets include markets in which the state is not the purchaser of welfare goods or services, but instead subsidizes non-state market actors in order to give them the possibility to exchange welfare services or goods. We follow an open definition of what constitutes social goods and services, which can be identified as such either by the functions they perform or by the fact that they are considered as such by the actors involved. In both cases, social goods and services are concerned with the social security of individuals and the social reproduction of society. As politically shaped and regulated markets providing social goods and services, welfare markets are closely related to the welfare state and its different public policy instruments. In certain cases, welfare markets have been added as an additional layer onto more traditional policies, such as the introduction of a private pension scheme next to statutory public pensions. In other cases, welfare markets have replaced existing public provisions, or developed parallel to familial activities, as has often been the case with welfare markets for care services. Studies of welfare markets in sociology and political economy have been very prolific in analysing the emergence of market structures and the rapid and ‘external shocks’ affecting markets, for example, economic crises. Existing work on welfare markets has underlined how institutions of the welfare state have played a central role in reorienting citizens to the market for protections that had traditionally been provided by families or social policies. Several studies have underlined the coherence between welfare state regimes and welfare market regimes (Köppe 2015). The role of agency in the rise of welfare markets has also received attention in some studies (Gingrich 2011; Meagher and Goodwin 2015; Crespy 2016; Pieper 2018), as have the cultural dimensions of welfare markets (Bode 2008). Yet, few studies have systematically analysed how welfare markets develop once created, and/or the consequences of different developments for the actual provision of welfare. In this volume, we focus on what happens after states initiate welfare markets. Aspers’ phase model of market

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development (2011) distinguishes between an initial period of organized introduction of a market and the contraction of a market around a specific set of actors supplying and demanding a good or service defining a specific market and sharing the rules, normative orientations, and understandings of what the market is about and how exchanges are conducted. We argue that an actor-centred focus which includes non-state as well as state actors is key to understanding how welfare markets grow and operate, who gains market access, uncovering the informal as well as formal dimensions of rules governing exchanges, their monitoring, and the sanctioning of misuses. Subsequent and reactive responses of states to re-regulate or alter welfare markets are also part of this focus. To analyse welfare market dynamics, we first need a set of shared conceptual tools to characterize welfare market institutions and outcomes. The subsequent sections of this chapter describe these tools, used in all contributions in the book, and preview the kinds of dynamics, which can be associated with various institutional set-ups. The shared conceptualizations used throughout the book render the dynamics of highly diverse welfare markets, most of which emerged in the 1990s, and in the subsequent three decades have undergone considerable reform, intelligible and comparable.

1.4 P  olicy Instruments Structuring Welfare Markets In his classic welfare regime typology, Esping-Andersen (1990) distinguished between three providers of welfare: the state, the family and the market. When welfare is provided by the state, the state directly provides insurance benefits (such as pensions benefits) or services (such as care services). There is no competition among providers, because the state is the provider. In the two other alternatives, the state is in principle not involved, since welfare is provided either by the family, meaning that families provide income security or care, or by the market, meaning that individuals have to purchase care services or insurance benefits on the market.2

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According to the definition we use in this volume, a market becomes a welfare market when the state is involved in initiating, regulating, financing, and/or communicating (about) a market where the goods and services exchanged are defined by the actors or researchers as welfare goods and services. As such, it can be seen as something in-between ‘pure’ state or market provision of welfare. With the policy instruments of welfare markets, we refer to the way in which the state organizes welfare markets. We distinguish three key sets of instruments (see Table 1.1 below). First, instruments that regulate the financing of the consumption or production of welfare goods and Table 1.1  Policy instruments structuring welfare markets Type of policy instrument

Main options

Explanation

Financial

Demand side: client receives The state finances clients to cash allowance enable them to purchase welfare goods or services on the market Demand side: client receives The state creates tax incentives to encourage clients to fiscal benefits (e.g. tax purchase welfare goods and break) services on the market Supply side: private provider The state subsidizes the price of services by private providers or welfare workers and/or the wages of welfare involved in the production workers of welfare goods/services are subsidized

Regulatory

Coordinating exchange

Standards

Informational

Communication campaigns, or platforms, administrative agencies

These instruments help to make sure welfare goods and services are paid to the seller and provided to the buyer These instruments help to define and evaluate the quality and limit the cost of the welfare goods and services produced These instruments help to develop a welfare market culture and to legitimize the commodification of welfare goods and services

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services; second, policy instruments that aim to secure the exchange and guarantee minimum quality standards, for example, through certification; and third, policy instruments used to communicate information about welfare markets.

1.4.1 Financial Instruments The financial instruments of welfare markets either remove the state from the provision of welfare goods and services or introduce private provision in addition to, or competing with, state provision. The aim of financial instruments is to stimulate the development of a market for benefits or services. Among the various ways in which states can finance welfare markets, a key distinction is the choice to support either the demand side or the supply side of the market. Both instruments often “blur the lines between public and private” (Gingrich, Chap. 2). When states finance the supply side, that is, by subsiding organizations or the costs of service workers, private providers either compete with each other for public orders or receive funding based on the number of clients they serve. To comply with European Union competition law, such competition is often organized through public tenders. The financing of welfare providers requires the development of financial expertise among both public officials and the participating providers. States can also finance labour costs directly, by subsidizing wages or reducing social contribution obligations of employers. States can finance the demand side by directly subsidizing welfare clients, through cash transfers or tax breaks/credits, with the aim of enabling them to purchase welfare services or goods. A cash allowance means clients receive a cash transfer with which they can purchase a service. In this case, they can easily trace a relation between an outcome (their use of a welfare service or good) and some governmental action. The goods and services that are purchased can vary from a place in a child care centre or home care provided by a care assistant to participation in a voluntary pension scheme. Cash allowances have become prevalent across the home-based services sector (Evers et  al. 1994; Ungerson and Yeandle 2007; Da Roit and Le Bihan 2010; Ranci and Pavolini 2013), for

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example, in the form of cash-for-care benefits in German long-term care insurance or child care subsidies paid to parents in France and the Netherlands (Apitzsch and Shire, Chap. 13; Ledoux et al., Chap. 12; van Hooren, Chap. 14; Cartier, Chap. 15). For pensions, state subsidies have been developed for voluntary personal pensions like the Riester scheme in Germany (Nullmeier, Chap. 5; Köppe, Chap. 6; Köppe 2015; Ebbinghaus et al. 2011, p. 137). Another way in which the demand side of the welfare market has been subsidized is through tax breaks or related fiscal instruments (Howard 1997; Hacker 2002; Mettler 2011; Morel et al. 2018). In this case, clients of welfare markets are subsidized through a reduction of (income) taxation, which makes state support less visible. When the tax refund only occurs ex-post, possibly up to a year after expenses are incurred, the incentives are very different than in the case of direct cash allowances. Tax reductions for home services have been introduced in different countries including France, Germany, and Sweden (Estévez-Abe and Hobson 2015; Carbonnier and Morel 2015; Guiraudon and Ledoux 2015; Hellgren and Hobson, Chap. 4; Ledoux et al., Chap. 12; Shire 2015), but their targets and calculations are different. Tax deductions or exemptions have also been introduced for personal pension plans in Germany and France (Ebbinghaus et al. 2011; Naczyk and Palier 2011; Nullmeier, Chap. 5; Naczyk, Chap. 10). When financing the demand side, public resources can be differentially allocated to populations and it becomes crucial to understand whether the financial dimension is redistributive or anti-redistributive (Gingrich, Chap. 2; Apitzsch and Shire, Chap. 13; van Hooren, Chap. 14). The precise choice of instrument has a pronounced impact on the way in which a welfare market develops as well as on the politics of welfare markets. For example, when states directly subsidize providers, they can control them better than when they support the demand side. When cash allowances or tax breaks are provided conditionally on the actual purchase of a service, the state retains greater control over the types of services that are provided in a welfare market. When cash allowances are paid irrespectively of whether or not a service is purchased, the emerging market becomes much more diffuse. In terms of politics, fiscal instruments like tax breaks are often adopted at a national level and embedded

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within annual fiscal procedures. They are associated with a very high level of complexity, and their effects are not easily readable for the wider public. In contrast, direct allowances adopted through different procedures often improve the likelihood of coordination by local authorities. Given these complexities, fiscal instruments are identified as being part of a “hidden welfare state” (Howard 1997; Hacker 2002) or a “submerged state” (Mettler 2011). The technical nature of these instruments often relegates their operation to ‘experts’. While direct allowances usually benefit every person, who classifies as a beneficiary, tax breaks, the costs for which are shared by all tax-payers, only accrue to those claiming them, and may, for that reason, only benefit certain socio-economic groups. Low-income groups, who pay lower taxes, do not stand to benefit as much.

1.4.2 Regulatory Instruments Next to financial policy instruments, welfare markets are also shaped through regulatory activities, including policy instruments, forms of self-­ regulation, and/or rules negotiated by market actors. We distinguish between instruments that set minimum standards for market participation and instruments that facilitate market exchange. Markets are often regulated through minimum standards, such as quality criteria for the products that are sold, and criteria for market entry by providers. Standards serve “as a valuation order regarding the offer of the market” (Aspers 2011, p. 113). Although market actors may influence the construction of standards, the state may enforce standards, giving them a coercive dimension. In welfare markets, standards aim to reassure consumers of the quality and reliability of the product or service they are buying. Standards can be set in relation to the education and training of workers, the financial conduct of pension funds, the ratio of staff to clients, and so on. For example, in certain countries like Sweden, Denmark, Norway, Slovenia, France, the Netherlands and Germany, childminders taking children into their own home for care need to obtain some form of certification (Unterreiner 2017; Apitzsch and Shire, Chap. 13). The state can also regulate market entry, by delivering a license to the market

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actors authorized to operate. It can also decide which provider of welfare services is publicly financed and which one is not. Such regulation is related to financing but directly concerns the supply. The state can also intervene on market entry on the demand side, by assessing the needs of the consumers who will be subsidized. Regulatory instruments that aim to facilitate exchange may also be directed towards coordinating the exchange or making it easier administratively. In some welfare markets, institutionalized intermediaries (such as brokers or recruitment agencies) may be charged with coordinating exchanges between sellers and buyers. The private exchange of welfare goods and services may also be facilitated by the creation and use of vouchers, as in education (Gingrich 2011; Gingrich, Chap. 2) and domestic labour. In some cases, these instruments have been conceived to ensure greater freedom of choice and efficiency of production than directly financed state services (Pieper 2018). For example, homebased care vouchers greatly simplify issues of taxation and social insurance declaration related to the employment of care or domestic workers. As such, they aim to make it easier for clients and providers to engage in welfare markets, without having to calculate social contributions themselves.

1.4.3 Informational Instruments Finally, informational policy instruments aim at influencing the welfare market culture and promoting use of the products through discursive or iconographic methods and the diffusion of norms concerning the way people should act in welfare markets. Public actors are central to the regulation of this instrument, as are interest groups that manage to position themselves as experts and also act within the public space. Different campaigns can be launched and rely on different discourses. Administrative agencies may also be created to disseminate information. It is in this context that the new plan aiming to develop household services in France in 2005 was accompanied by a huge national publicity campaign (Jany-­ Catrice 2015) and that a specific independent agency, the Agence Nationale des service à la personne, which was in charge of collecting data, expertise,

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and informing the public, was established between 2005 and 2014. Informational policy instruments may be easier to change, suppress, or expand, since their impact may be more difficult to evaluate (Köppe, Chap. 6). Nevertheless, the stream of communication they develop is very important, since it can moderate or strengthen citizens’ anxieties or disorientation on the welfare market (see Bode and Lüth, Chap. 7). As explained previously, policy instruments are not interchangeable and convey specific cognitive frames and relations between organized actors and the public (Hood 1983; Howlett 2010; Lascoumes and Le Galès 2005). Rules and laws have a symbolic function, stating collective values and orienting behaviours, while economic and fiscal instruments have an allocative and incentivizing dimension. The instruments chosen create different resources and constraints for those concerned. Choosing a policy instrument is not neutral and can entail a path dependence related to the policy instrument chosen (Lascoumes and Le Galès 2005).

1.5 Outcomes of Welfare Markets Analyses of welfare state policies typically address the questions: ‘who is covered’, ‘what kind of benefits’ or ‘how generous’? Using the same theoretical tools as in the analysis of welfare state policies is not sufficient for analysing the contours of welfare markets, in which the interaction of and balance of power between different actors need to be added as an important object of study, as well as the extent to which a market for welfare is commonly accepted. For the former, we rely heavily on Jane Gingrich’s work, (Gingrich 2011; Gingrich, Chap. 2), expanding her distinction between productive and allocative dimensions of welfare market outcomes, emphasizing the balance of power and negotiations between different sets of actors in driving the dynamics of welfare markets. The balance of power within welfare markets, we argue, is crucial to understanding the distributional outcomes of welfare states. We expand Gingrich’s concept of productive outcomes to include the role of labour in welfare markets, which involve service workers, and by adding discursive outcomes relevant to the acceptance and legitimation of welfare markets (see Nullmeier, Chap. 5).

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1.5.1 Productive Dimension Gingrich (2011) distinguishes between a productive dimension and an allocative dimension. Through the productive dimension, she aims to understand who, in practice, controls or dominates the welfare market, thus referring to the balance of power between the state and other actors in the market. Gingrich identifies three constellations: state-driven markets, consumer-driven markets, and producer-driven markets. We refer to these as actor-dominated constellations, rather than actor-driven, to underline how shifts in the balance of power may account for market dynamics. We also add to Gingrich’s typology a fourth, labour-­dominated type of welfare market, especially important where the provision of welfare services depends on a supply of professional and service labour. While we delineate between the dominance of specific actors, we recognize that, in practice, welfare markets are never completely dominated by any one actor, and understand the typology in Table 1.2 as ideal-types. In state-dominated welfare markets (state-driven in Gingrich 2011), the state plays a strong role in monitoring performance and can steer a market in a preferred direction. This can be the case, for example, when a market is organized through supply-side financing with direct contracting (tenders), provided that contracts can be cancelled or renewed regularly (Gingrich 2011, p. 13). In the case of demand-side financing, a state can maintain a certain level of control through strict standards or highly secured exchange mechanisms. It forces the providers to respond to state requirements. In state-dominated markets, states not only retain control

Table 1.2  The outcomes of welfare markets Dimensions of market outcomes Productive

Allocative Discursive

Types of outcomes State domination Consumer domination Seller domination Labour domination Universal Selective Accepted Contested

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over the quality of the services and benefits that are provided, but also over the costs in terms of state expenditure. The fact that welfare service markets tend to operate locally means that local public authorities are also actors in market-making activities (van Hooren, Chap. 14; Cartier, Chap. 15). Consumer-dominated welfare markets are markets in which users have effective control. The capacity of consumers to influence markets depends in part on their knowledge of the offers, and a sufficient degree of competition, presenting them with a real capacity to choose between different providers of welfare goods and services, and to exercise a real ‘exit’ option. Demand-side financing is more likely to lead to a market where consumers exercise control, while regulations providing procedural rights and informational instruments improving the knowledge of consumers about offers enhance their capacities for exercising choice and exit options. Yet, consumer-dominated welfare markets depend on sufficient competition, which means prohibiting the formation of monopolies on the supply/ seller side of welfare markets. Moreover, “incentives for producers to respond to users’ preferences for high quality production” must also be in place (Gingrich 2011, p. 15). Consumer-dominated welfare markets may lead to a greater emphasis on users’ preferences and can also entail an increase in public expenditure (Gingrich 2011). Health care markets where insured persons have a choice (see Blank, Chap. 9) and domestic/ care service markets where parents or the elderly purchasing services are empowered to make choices and influence the quality of market services are at least potential cases of consumer-dominated markets, though this depends on the capacities of users to exercise control (Meuret-Campfort, Chap. 8) and collective consumer interest representation (Blank, Chap. 9). Private pension schemes tend to be more state- or seller-dominated (Köppe, Chap. 6) and, in the German case, largely fail to empower consumers to make informed choices (Bode and Lüth, Chap. 7). In seller-dominated welfare markets (producer-driven in Gingrich), providers have “the room to shape service delivery in line with their own preference” (Gingrich 2011, p.  17). These market constellations can emerge through supply-side financing if the state contracts out services but does not have effective means to control quality, to cancel contracts, or to regularly organize new tenders. Alternatively, welfare markets

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dominated by sellers can emerge by way of demand-side financing where users receive direct subsidies but do not have the effective means to assess quality or to change to another provider. Analysing seller-dominated markets also means understanding how businesses and employers’ organizations manage to introduce their preferred ways of organizing the welfare market. It becomes necessary, however to sometimes go beyond the doors of national business/employers’ confederations in order to understand the preferences, resources, and strategies of sellers (Naczyk, Chap. 10; Ledoux et al., Chap. 12). The German private pension market analysed by different authors in this book is an example of seller-dominated markets, albeit with continual attempts for the state to expand demand (Nullmeier, Chap. 5; Bode and Lüth, Chap. 7; Köppe, Chap. 6). Sellerdominated markets, if unchecked in their power, risk higher costs for either users or the state and lower quality services. As a fourth type, we add labour-dominated welfare markets, in which service professionals and workers effectively control a significant part of the market. This type is, of course, only relevant where an interpersonal service is exchanged on a welfare market, meaning that labour markets arise within the welfare service market, such as in health care services, private education markets (see Gingrich, Chap. 2), unemployment services, and in this volume, domestic/care services. Welfare labour markets are thus “markets within markets” (Aspers 2011). Yet, labour, unlike other commodified welfare services such as insurance premiums, is not produced for sale, and the dependence of workers on selling their services to secure their own livelihoods creates an inherent imbalance of power between workers as sellers of their own labour power and those who buy their service labour (Shire, forthcoming). Moreover, labour markets are increasingly operated through intermediaries, who buy the labour capacities of workers in order to sell it back to clients, effectively shifting the balance of control away from workers and consumers and towards third-­ party profit-takers. This is especially true for cross-border labour markets supplying migrants to welfare markets. The regulation of intermediaries is a neglected issue in the operation of contemporary welfare markets. Our emphasis in this volume is on the direct engagement of service workers in domestic/care welfare services (Meuret-Campfort, Chap. 8) and the role of interest representation in improving the balance of power between buyers and service workers (Apitzsch and Shire, Chap. 13; van

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Hooren, Chap. 14) and the specific problems faced by non-citizen and immigrant labour in welfare service labour markets (Hellgren and Hobson, Chap. 4). With the exception of highly professionalized welfare services, labour rarely dominates in the dynamics of welfare markets (Hellgren and Hobson, Chap. 4), but in reference to policy instruments, and how they vary across sub-sectors of domestic/care labour (Apitzsch and Shire, Chap. 13; van Hooren, Chap. 14) and cross-nationally (Hellgren and Hobson, Chap. 4), we do find systematic variations in the balance of power between states,  sellers, consumers, and workers. In part, this depends on the degree of formalization/informalization in the labour market segments created and shaped by state-policy instruments (Apitzsch and Shire, Chap. 13), the interest and capacities of trade unions, professional associations, and/or migrant rights organizations to represent welfare service workers and mobilize for improving working and employment conditions and to empower the workers for demanding the implementation of their social rights (Cartier, Chap. 15; van Hooren, Chap. 14; Apitzsch and Shire, Chap. 13). State-policy instruments often create new forms of service work, new occupations, new supplies of labour, and new forms of employment (Shire 2015). Where state-policy instruments draw on migrant labour, the effects are usually negative for workers, regardless of the welfare state context (Hellgren and Hobson, Chap. 4). Moreover, the disempowerment of workers does not necessarily lead to a power advantage on the part of consumers (Meuret-Campfort, Chap. 8). Professionalism, as the “establishment of regulatory mechanisms”, when “groups of workers and other actors manage to craft and construe jurisdictional spaces” and professional power (Noordegraaf 2015, p. 131), is neither necessary nor enhanced by marketization (Klenk and Pavolini 2015). Furthermore, in the balance of power of users and labour, vulnerabilities may also lie on the side of service recipients (Meuret-Campfort, Chap. 8). By bringing labour into the analysis of welfare markets, we introduce the role of trade unions, migrant rights organizations, and professional associations into the study of the dynamics of welfare markets (van Hooren 2018; van Hooren, Chap. 14; Hellgren and Hobson, Chap. 4; Apitzsch and Shire, Chap. 13; Cartier, Chap. 15; Ledoux et al., Chap. 12). As with consumers, collective representation may counterbalance

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the power of private enterprises or employers in the control of welfare markets. Collective representation may  de-commodify welfare labour markets, for example, by formalizing employment, stipulating social protections for service workers, or by creating quasi-monopolies through professional service licensing and entry barriers into professions. If collective representation and state policies effectively formalize, protect, and professionalize welfare service labour, welfare markets may be labour-­ dominated. Attention to the role of labour also foregrounds the role of migrant labour. This is a highly prevalent labour force in many European domestic/care sectors, and ties the dynamics of welfare markets to the coordination and regulation of migration markets, issues of citizenship, and the enforcement of labour rights across national borders (Eleveld and Van Hooren 2018; Hellgren 2015; Hobson et al. 2018).

1.5.2 Allocative Dimension The allocative dimension refers to the extent to which goods and services produced by a welfare market are allocated or distributed universally, granting equal access to all users, or selectively, when personal resources and abilities determine access to the costs of welfare market products. Hence, the allocative dimension is related to the classic welfare state comparison of universal vs. social insurance vs. means-tested benefits. In welfare markets, universal allocation occurs, for example, when the state contracts out services or goods, while guaranteeing that all citizens have equal access (see Gingrich 2011 on Swedish health care). By contrast, selective/individual allocation occurs when market providers can select clients (and exclude those that could become more expensive, such as people with a chronic illness), when consumer financing is means-tested, or conversely, when consumer financing is regressive (as is often the case with tax breaks), or when clients have to pay out-of-pocket contributions making services less accessible for some. Besides the price, allocation is also dependent on geographical access to welfare goods and services, and their administrative costs. In the case of labour-intensive services, the availability of services across territories, and determining  who covers mobility costs (e.g. for ambulatory care services) affect the allocative dimension. In reference to welfare market regulations, bureaucratic

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procedures, and how easily they may be completed for accessing available state financing may also pose obstacles for claiming and accessing market services (see also Meuret-Campfort, Chap. 8).

1.5.3 Discursive Dimension To the productive and allocative dimensions identified in Gingrich’s (2011) original typology of welfare market outcomes, we add a third, discursive dimension (Table  1.2). The discursive dimension features prominently in the sociology of markets and refers to how and to what extent markets and their products become politically communicated, legitimated, and socially accepted, as well as focusing on the meanings which actors give to, and the shared understandings that develop about welfare markets (Callon 1998; Bode 2008). Discourses not only convey cognitive and normative dimensions of welfare market institutions, but also have material consequences (Schmidt 2008). By discursively framing the effect of welfare markets, international organizations, the state, employers, unions, experts, other civil society and market actors inform and shape the national public debate (see Bitinas, Chap. 11). Marketcentred communication is not only limited to advertising, but also includes understandings about the role of markets overall (Bode 2008, p. 7). The politics of extending markets for welfare services point to how actors may contest markets for welfare, challenge the discourses promoting markets, and mobilize coalitions around opposition (Crespy 2016, p. 18; Crespy, Chap. 3). The long-term success of welfare markets depends on citizens’ interpretations and use of policy instruments, and on public acceptance of welfare market institutional changes.

1.6 A  ctors, Agency, and Dynamics of Welfare Markets Policy instruments and the outcomes of welfare markets form the common basis for the analyses in this volume of the sources and trajectories of dynamics in welfare markets. A key point is whether welfare markets become established and stable, or remain volatile, why, and/or whether

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they expand their coverage, decline, or even fail to meet the original policy goals pursued in their creation (Nullmeier, Chap. 5). Dynamics of welfare markets may be driven by shifts in the relative importance of policy instruments (financial, regulatory, and informational instruments), in attempts to correct, stabilize, or expand welfare markets, or by how demand-side or supply-side financial, regulatory, or informational instruments are targeted in subsequent reforms and re-regulations. Likewise, dynamics in welfare markets may become evident through changes in the power or resources of particular actor groups, for example, changes from a state-dominated welfare market to a consumer-dominated one, or from a seller-dominated to a labour-dominated market. Changes may also occur in allocative dimensions (from universal to selective or vice versa) or in discursive dimensions (in the ways in which welfare markets are legitimated, and the degrees to which they are accepted or contested). Following Streeck and Thelen (2005), we see the implementation of policy instruments organizing welfare markets as cases of gradual welfare institutional change, which in the context of the continental social welfare systems, tend not to displace or exhaust existing forms of welfare provision. Welfare markets in all the cases analysed in this volume begin with policies that layer market institutional elements onto established public or familial welfare institutions. Their dynamics, as Mahoney and Thelen (2010) emphasize, are actor-driven, and range from the erosion of the new welfare market institutions, in what Streeck and Thelen (2005) call drift (as in the failure of German private pension markets, Nullmeier, Chap. 5, and the outsourcing of domestic labour in Germany, Apitzsch and Shire, Chap. 13), or conversion of market elements (e.g. in the change back to social provision in the Swedish private pension markets, Köppe, Chap. 6). Welfare institutional changes occur not only in relation to formal policy changes, but also in the interpretation, practice, and implementation of financial, regulatory, and informational instruments and their outcomes. States are key actors and initiators of welfare markets, but the dynamics of welfare markets, we argue, are also shaped by other actors, including regional and local governments, private for-profit and non-profit service providers, employers’ organizations, and citizens transformed through welfare markets into consumers and users of private services.

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Market actors may also include workers and trade unions, as well as experts, journalists, and other civil society actors who contribute to the legitimization of markets (Nullmeier, Chap. 5; Ledoux et al., Chap. 12). Social actors are not neutral towards welfare markets: they use them strategically, interpret and judge them, anticipate their development, mobilize for or against their dynamics, and attempt to shape them in line with their own interests. The interpretation and implementation of welfare markets are thus also a factor in their dynamics and welfare institutional change (Mahoney and Thelen 2010). Social actors have different types as well as reserves of resources they can employ to influence how markets evolve. We draw in this volume on recent research about social organizations and movements, which shows how market categories and institutions can be objects of struggle, conflict, and contentious politics (Crespy 2016; King et Pearce 2010; Crespy, Chap. 3; van Hooren, Chap. 14). Finally, the politics of welfare markets may also change, with the creation of new actors, such as consumer organizations (Blank, Chap. 9), employers’ organizations (Ledoux et  al., Chap. 12), or with shifts in power resources (Blank 2008; Pieper 2018). Market making can trigger self-reinforcing dynamics, or the contrary, negative feedback effects (Pierson 1993; Soss and Schram 2007). The contributions to this volume share the view that explaining the dynamics of welfare markets requires an actor-centred approach and focus on practice to identify the interests, roles, and coalitions of different sets of actors in legitimizing, challenging, stabilizing, and changing welfare markets.

1.7 C  omparing Two Fields in European Welfare States The contributions to this volume address welfare markets at the European Union level and in European countries situated in different types of welfare states, including countries with a conservative, familial, or social-­ democratic heritage, as well as one post-communist country in Eastern Europe (usually neglected in studies of welfare markets). Several chapters

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cover comparisons of welfare markets in different types of welfare states, but also more local welfare markets. The countries studied include France, Germany, Lithuania, the Netherlands, Spain, and Sweden. This broader European focus raises a number of new issues, such as the role of traditional social policy actors, like social partners (trade unions and employers’ organizations) and new ones (consumer organizations, the finance industry); the relationship between unpaid domestic labour and outsourced care services; and the dynamics of private pensions in volatile financial markets. The range of country cases and the comparison between old (pension) and new (care) social risks allows for an exploration of how different institutional and policy contexts as well as actor constellations are leading to unexpected convergences or new divergences in European welfare markets. Across different types of welfare states, the delivery of welfare goods has increasingly opened up to private providers and the mix of private and public actors has brought new ways of managing the welfare state. Often this entails competition in social service markets, and the transformation of citizens into consumers (Blank 2008; Blank, Chap. 9). In the course of welfare market reforms, political elites across the party spectrum have begun to share the view that promoting competition has a “positive impact on the efficiency and the effectiveness of services, on their quality and flexibility or responsiveness to local and individual needs, and on their price” (Jantz and Klenk 2015, p. 109). In some welfare fields and especially in the six selected countries, these reforms may even be seen as path-shifting (Palier and Martin 2008). In this volume, we juxtapose developments in welfare markets in two very different sectors to understand whether common trends can be found. These sectors are private pensions and home-based domestic/care work services, the latter covering domestic labour, child-, and elder-­ dependent care.3 Old-age pensions are a long established and core field in welfare state research, involving a transfer, while domestic/care services are a more recent development, for the state and for welfare research, tied to policies for increasing women’s labour force participation, demographic changes, and the creation of new service markets. Private pensions and domestic/care service markets differ systematically in the following dimensions: the nature of the good/service exchanged on the

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welfare market (Sect. 1.7.1), the relation to state policies (Sect. 1.7.2), the nature of the actors in the fields (Sect. 1.7.3), and the time horizon of the objects of exchange (Sect. 1.7.4).

1.7.1 The Good/Service Exchanged Private pensions and domestic/care services differ, firstly, concerning the nature of the object exchanged. In the private pensions sector, the welfare market aims to provide money to consumers, in order to maintain income after retirement or at least supplement savings. In contrast, the object of exchange in domestic/care services is labour, which is a human activity, often involving intimate tasks (Zelizer 2001). Domestic and care labour provided as a service takes a number of different employment forms, ranging from unregistered work to direct and formal employment relations, and often involving intermediary organizations, such as public agencies, non-profit organizations or for-profit firms. In all cases, buyers purchase labour power, which is then transformed in the household into the actual provision of services. This may situate ‘users’ or ‘consumers’ of welfare markets in the formal or informal position of ‘employers’, depending on how the welfare market is shaped through state policies. Even when service workers are employed by a firm, which then dispatches them to a private household, the actual service work relation is at least partly controlled and supervised by the recipient, that is, the persons and families using domestic/care labour. As extensive research on care work has shown, home-based domestic/care workers where households are the employers can be in a particularly vulnerable position (Ehrenreich and Hochschild 2003; Yeates 2009; Lutz 2011; Triandafyllidou and Marchetti 2015). Moreover, domestic/care work is often racialized and highly gendered, especially when migrants comprise a significant share of the labour market (Anderson 2000; Marchetti 2014; Avril and Cartier 2014). States may take advantage of the demographic characteristics of domestic labour to construct such services in low-cost and less secure forms of employment, justifying such forms as incentives to improve the take-up of such services (Carbonnier and Morel 2015; Estévez-Abe and Hobson 2015; Shire 2015; Van Hooren 2018).

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The differences in the objects exchanged in the two welfare markets covered in this volume—financial products versus labour service—may also imply variations in relation to the state, actor constellations, and the sorts of uncertainties faced by market actors.

1.7.2 The Relation with State Policies Welfare markets for pension and domestic/care services are closely related to welfare services and goods directly provided by the state or local governments. The basic policy decisions concerning the level of income maintenance in public pensions entail important consequences for private pensions and open a space for  them (Ebbinghaus and Gronwald 2011). These decisions are made differently according to the pension system. In systems which have kept the institutional organization inspired by Bismarck at the end of the nineteenth century, pensions are “contributory schemes which pay earnings-related benefits and are mandatory for particular occupational groups” (Ebbinghaus and Gronwald 2011, pp. 39–40). Financed by social contributions, public benefits are understood as being earned through employment and are thus more difficult to reduce (Bonoli and Palier 2007, pp. 20–24). Other countries have never adopted a real social insurance component (Britain) or abandoned it very early (the Netherlands, Switzerland) in favour of a tax-based scheme, applying the principle of the Beveridge report of 1942: a basic universal flat-rate public pension financed through general tax or non-credited payroll contributions. Though adopted early, the public pensions of Beveridgean schemes were meagre and thus opened the way for the parallel creation of private occupational pensions and pension fund components early on. Pensions are part of the old welfare state, and market making in this sector often means introducing a new institutional layer or building upon an existing, but small private sector, whose growth depends on political decisions concerning public pensions. Private pensions have not replaced public pensions, but the fact that they are layered onto these opens the potential for private pensions to gradually crowd out public pensions (Hacker 2002; Ebbinghaus 2011). As this layering process has developed

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over time, the timing and sequencing of events are very important for the politics of reform and the dynamics of welfare markets. Critical junctures have marked the changes in the public-private pension mix (Ebbinghaus and Gronwald 2011, pp. 27–30). After the 1970s, a critical juncture in pension policy concerned the answer to the economic and demographic problems which challenged the sustainability of pension schemes. In France and Germany, a process of institutional layering fostered private pensions, allowing individuals to supplement their existing entitlements with a private component (Nullmeier, Chap. 5; Naczyk, Chap. 10). In Sweden, private pensions were merged into the public pension scheme, making private retirement savings by individuals mandatory, and thus universalizing the welfare market for private pensions (Köppe 2015; Köppe, Chap. 6). Compared to the pension field, in the domestic/care services markets, the necessity for the state to finance and regulate was recognized much later (Bonoli 2007), with strong national and cross-national variations in types of domestic/care services (child care, elder care and domestic help). The transformation in this case was not from public to private provision, but rather to replace the unpaid labour of women in the family with market services. In France, and especially the Netherlands, publicly funded home-based care services were introduced starting in the 1950s and expanded in the 1970s and 1980s (Van Hooren and Becker 2012). Rather than financing the supply of services, care and domestic services, with some cross-sector and national variations, have been stimulated mainly through demand-side financing, including cash-for-care schemes and tax breaks (Bonoli 2007; Ranci and Pavolini 2013; Carbonnier and Morel 2015).

1.7.3 The Actors Involved Because of their different nature and historical development, there are big differences in the ways in which collective actors are involved in private pensions and domestic/care services. In many Western European welfare states, strong employers’ organizations and trade unions have been

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involved in the organization and administration of old-age pensions for over a century. Consequently, these actors are directly affected by and have tried to maintain their position in marketization dynamics. Meanwhile, as a result of increasing marketization, insurance companies and pension funds have emerged as resourceful actors with the potential to influence policy choices and welfare market dynamics insurance companies have been particularly powerful actors (Naczyk, Chap. 10). On the contrary, in the domestic/care services sector, the involvement of such organized actors has been weaker historically. Trade unions in European welfare states have been more focused on the (male) industrial sector than on the (female) care sector and hence usually have not developed a strong interest in its organization. Except in public sector institutional employment, care and domestic workers have not formed the core of trade union membership and unions have at most been marginally involved in the design and dynamics of these welfare markets. Similarly, employers’ organizations have been nearly non-existent or, in some instances, have only recently developed an interest in the home services sector (Ledoux et al., Chap. 12). Compared to other sectors, the resources of employers’ associations vary considerably cross-nationally. Beyond the organized actors, those who engage in pension and domestic/care markets are also different. While private pensions are bought by people before they become old and contributions are paid continually over time (this is also the case with long-term care insurance where it has been established), domestic and other care services purchases vary with changing needs over the life course (when children are young, when parents spend more time at work, when dependent elderly care needs arise).

1.7.4 Uncertainty and the Time Horizon of Risks Finally, the dynamics of these welfare markets are related to different risks for the users in which time plays a key role. Domestic/care services entail the risk of being misused or abused (which also applies to the worker providing the service), getting a service without the expected quality, or (for the provider or worker) providing a service without the expected pay or working conditions. In pensions, the key risk is an income lower than

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expected in the future. Consequently, the dynamics of private pension schemes are related to the capacity to anticipate the long-term future while care and domestic work welfare markets are much more developed around the selling and buying of services currently needed, and market exchanges may be more short-term.

1.8 U  sers, Employers, Firms, and Labour in the Dynamic (Re)construction of Welfare Markets All the contributors to this volume share a common interest in the study of welfare market dynamics. These dynamics articulate micro, meso, and macro dimensions and concern time periods which differ from one market to another. In all cases, changes are analysed between the situation at a given moment t and the situation at a later time t+1, or beyond. These changes concern very different dimensions of welfare markets: size, prices, the social order of the market itself, social discourses about welfare markets, the distribution of the goods and services, production and employment conditions, the power of actors on the market. These different dimensions may evolve autonomously, or interact with each other, so that in certain circumstances, the politics of the welfare markets themselves change. The two sectors and the country cases analysed in the volume contribute to a better understanding of the functioning of welfare markets, the mechanisms that determine their transformation at different levels of analysis, and convergence and divergence in their dynamics. The volume is structured into five parts. Part I, following this introduction, includes two different approaches to general welfare market dynamics in Europe. Chapter 2 by Jane Gingrich presents an overview of the state of research about welfare market dynamics. She distinguishes two dimensions along which welfare market dynamics affect actors: the distribution of goods and services across groups, and the power relations between them. Three spheres are affected by market dynamics: the electoral, the bureaucratic, and the productive. Gingrich shows the heterogeneity of welfare market dynamics: welfare markets may create dynamics

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of unequal distribution and greater private power, but they do not always do so. Gingrich conceptualizes and illustrates how, with examples from different countries and sectors changes in the state may occur through markets. She invites us to look at the details of regulation, financing, and incentives which operate for different actors, and underlines that the political consequences of welfare market dynamics are not universal. Chapter 3 by Amandine Crespy engages in a discursive institutionalist analysis of the role of the European Union in the marketization of welfare, focusing on policy reforms and contestations thereof in welfare markets at the European and national levels of many EU member states. She shows how, over time, opposition to the organization of welfare markets at the European level has become more and more difficult. While opposition to the Service Directive of Commissioner Bolkenstein triggered a pan-European mobilization between 2004 and 2006, since the 2008 crisis, market-promoting decisions by the European Commission have been much more difficult to contest. Part II turns to research on the (re)construction of domestic/care service and private pension welfare markets. Chapter 4 by Zenia Hellgren and Barbara Hobson argues that welfare markets are shaped to varying degrees by the type of welfare system in which they are embedded. They do so by comparing home-based domestic care labour in Spain and Sweden, two welfare markets which differ in terms of policy instruments, access to services, and in the employment conditions of home-based domestic and care workers. The Spanish domestic/care service market is best described as a “hidden welfare market” due to its reliance on the direct employment (often without contract) of mainly migrant (often undocumented) labour. The Swedish reliance on tax credits for services of domestic workers, who are formally employed by service firms, is congruent with the reliance on tax-financed and socialized welfare service provision in this country. Yet, especially since the 2008 crisis, the dynamics of these different welfare markets exhibit surprising similarities in how access is limited to higher earning households, and in the relatively poor working conditions of welfare workers, especially migrants. Despite the formalization of domestic labour in Sweden, many migrant workers,

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even in enterprises, do not receive an employment contract. Thus, the traditional differences in types of welfare state do not shape the dynamics of welfare markets for domestic/care services as much as might be thought. Chapter 5 by Frank Nullmeier analyses the dynamics of the German Riester pension, a private pension program co-financed by the German Federal government. For Nullmeier, the Riester pension established in 2001, provides a case study of a welfare market failure, and his aim is to understand what contributes to the stagnation of the private pension market in its second decade. Nullmeier seeks an explanation for market failure in politics and reforms, in changes in the economic environment, especially declining interest rates, and in policy discourses promoting or disparaging the private pension scheme in interaction with political reforms and economic conditions. The failure was not, in his analysis, due to a lack of political reform activity, though a shift in political aims to promoting occupational pensions is noted. Economic conditions may have played a more important role, as declining interest rates from 2008 affected the attractiveness of pension savings plans. This depended, however, on discourses about the policies in academic circles and the print media. In his original analysis of two leading news dailies in Germany between 2005 and 2016, Nullmeier shows how the relative weight of positive and negative statements about the Riester pension turned to predominantly negative statements after 2008. By 2016, statements of political actors across the party spectrum had adopted the ‘failure frame’ in their discussion of the Riester pension. While politics and economics matter, Nullmeier stresses the impact of policy discourses on the political and economic dynamics of welfare markets. All the more surprising is the relative success of a third pillar of private pensions in Sweden, which, with its matched contributions, might signal a departure from the traditional tax-based social-democratic social security institutions. Comparing the Swedish private pension to the political development of the german  Riester pension, Stephan Köppe finds evidence for the return, in Sweden, to policy interventions stressing more universalistic rather than market-based distributional outcomes. Thus, the poor economic conditions discouraging private saving pension plans

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in Germany, and leading to the erosion of the German pension welfare market, are counteracted in Sweden by the state stepping back into the market. The Swedish state, Köppe shows, has attenuated market competitive mechanisms through new regulations which graft the traditional social-democratic social protection aims of state provision onto the market system. In terms of institutional change, the German pension market is layered onto the statutory scheme, but fails to bring about a turn to the market. In Sweden, private pensions fail similarly, but by converting back, through state intervention, to a social-democratic welfare type of social security. Parts III, IV and V focus on the role of specific actor constellations in the dynamics of welfare markets. Part III addresses the dynamics on the users’ side, that is, investors (in the case of private pensions), private households and their members needing care (in the case of domestic/care services), and the organizations representing them in politics and the market. This section fills an important gap in the literature about the experiences and responses of users, and how they shape the development of welfare markets. Chapter 7 by Ingo Bode and Ralf Lüth examines the mind-sets of users faced with decisions about investing or not in private pensions in Germany. Bode and Lüth argue that the public debates and reforms covered in the chapters by Nullmeier and Köppe in Part II of this volume have created a ‘capricious environment’ within which users mostly experience disorientation and anxiety about how and whether to invest in private pension schemes. They find that German citizens with a steady income, and thus a predictable statutory pension, are more likely to plan actively for post-retirement income and to take on the financial risk of investments in the private pension market, while those who are working in less secure employment, and who ostensibly need to plan and save, fail to do so at all. While fears about the future cut across socio-economic lines, those who exhibit the most anxiety tend also to trust political institutions the least. The failure of the private pension market to provide a sustainable alternative form of social security for those who may be most in need of it, potentially feeds into authoritarian political movements and discourses of ‘welfare nationalism.’

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Chapter 8 by Eve Meuret-Campfort turns to examine how elderly French persons eligible for subsidized home elderly care services take on the role of employers of care workers. While 80 percent of such services financed by the main elderly care allowances are provided by for-profit and non-profit organizations, the focus is on the 20 percent of households that continue to directly employ care workers, often in order to gain more control over the choice of care worker and the work performed and because it is cheaper. She defines the role of employer as a form of work itself, given how the relatively well-regulated French market has created administrative procedures, and obliged users to make formal labour contracts and abide by collective agreements, about which they may have no information. As in the case of users of private pensions in Germany, she finds a difference between wealthier households, who are accustomed to acting out the role of employer, and working-class households, who even if they have the administrative skills to enter into labour contracts and manage work, shy away from the dispositions required of employers. As a result, many households pay intermediary organizations to handle recruitment and administrative procedures, with the benefit of professionalizing and formalizing household employment relations. Still, many elderly persons are not able to find and engage an intermediary organization on their own, meaning that the employment of domestic/ care labour involves the ‘hidden labour’ of other family members. Elderly without family members to support them, and who may thus be in most need of market services, are thus also most likely not to use this market. Welfare markets transform users into consumers, and Chap. 9 by Florian Blank examines the presence of consumer organizations as new actors in the politics of welfare markets in Germany. In an original analysis of the participation of consumer organizations in government hearings about pension and health care reforms over the past three decades, Blank finds that such organizations have gained a regular presence in policy deliberations in Germany. In the commissions where pension reform is discussed however, consumers only are invited to sessions about private pension reform. In commissions deliberating health care reforms however, consumer organizations are not restricted to discussing private insurance, and have gained a voice in the full-range of public and private health care reforms.

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In Part IV, the discussion turns to the dynamics of firms and employers in welfare markets, with two chapters focusing on pensions covering France and Lithuania, respectively, and one chapter about domestic/care services employers in France. Chapter 10 by Marek Naczyk on financial service enterprises in France analyses how welfare markets for private pensions can split business interests, trade unions, and political parties and how these markets can be segmented. Tracing the development of tax incentives dedicated to private retirement products, the author shows how French policy makers tried to enhance these incentives in the context of the retrenchment of pay-as-you-go schemes and strong opposition against these products. The social partners saw the development of private accounts as a threat to the schemes they already managed and some members of the socialist party feared the development of ‘social liberalism’. On their side, insurance companies wanted to develop their own products. Compromises were reached which institutionalized a segmented private pensions market, prior to the liberalizing reforms initiated by Emmanuel Macron, aiming at the creation of a single product. In Chap. 11, Audrius Bitinas introduces the European Union and the European Court of Human Rights as actors that can shape welfare markets. He shows that European actors have been very active in the promotion of occupational pension schemes, through their legitimization, but also through different directives and Court decisions. Nevertheless, despite the continuous efforts of experts and international organizations to promote a welfare market for funded occupational pensions, discourses and instruments failed to create one in Lithuania because of the lack of financial incentives, the weakness of social partnership, and the widespread use of quasi-mandatory privately managed pension schemes. As in other cases, the development of this welfare market has been dependent on the availability of other alternatives. Chapter 12 by Clémence Ledoux, Rafael Encinas de Muñagorri, and Virginie Guiraudon turns to the role played by employers’ organizations in the organization of welfare markets. The authors show how the conflict within the main French national confederation of employers between the services sector and the industry sector made possible the emergence of specific organizations defending the interests of for-profit providers of home services, before the creation of such firms. These organizations had

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to integrate the classical repertoire of action of social partners, to organize emerging firms, to rely intensively on expertise, elite networks, but also on the European directive on services in order to make the policies more firm-friendly and to orientate the welfare market towards a more producer-­dominated market. The chapter shows how successful these strategies have been. The employers’ organizations studied have managed to become considered as representatives of the home-based care/domestic sector, and they have been successful in securing market access and demand-side financial instruments for firms. While for-profit firms were absent in the home-based domestic/care sector until the 1990s, they have grown very quickly in the 2000s, and have  also achieved access to the financing of the home-based care allowance. The dynamics on the labour side covered in Part V focus on domestic/ care service markets, which, unlike private pensions, depend on the organization of a labour force of service workers. This part focuses on different cases of conservative welfare states, which, to varying degrees across the sub-sectors of domestic labour, child and elderly care, have relied on the unpaid labour of women in households. In Chap. 13, Birgit Apitzsch and Karen Shire show how welfare market instruments have created very diversified public, non-profit and private for-profit service sectors, with systematic variations in employment forms and working conditions. They view the development of the home-based private market sectors as involving the informalization of employment and working conditions, and the exclusion of home-based domestic/care workers from collective representation. Overall, this is due to the combination of financial instruments with regulations which set lower floors than for formal sector equivalents for training, social protections, and wages of welfare service workers. Trade unions, to the extent that they attempt to represent home-­ based domestic/care workers, only do so as far as their interests converge with those of their core constituent members. Trade unions in the Netherlands and France have responded quite differently to the representation of domestic and care workers. Chapter 14 by Franca van Hooren shows that in the Dutch case, trade unions have been key representatives of workers in all three marketized domestic/care sectors: child care, home care and household services. As in Germany, in each of these sectors, the reforms encouraging the creation of for-profit

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providers and competition have had negative consequences for employment opportunities and working conditions. While trade unions opposed these reforms, they have not been able to prevent or alter them. In increasingly complex care markets, involving local governments, for-profit and non-profit providers, clients and parents’ organizations, trade unions have started to follow more confrontational strategies with the aim of enhancing workers’ power position. The effects of these new strategies have been mixed or are still to be seen. In the final Chap. 15 by Marie Cartier, the focus is on a sub-sector of child care in France, mothers’ assistants, who are the equivalent to the day mothers in Germany who care for children in their own private homes. Spanning 30 years of research on this sector, Cartier shows very clearly the effects of adding protective employment regulations to financial instruments on the quality of employment and working conditions in welfare markets. In contrast to Germany, where day mothers are defined as self-employed businesses, mothers’ assistants since 1977 have been clearly classified as workers, with labour contracts, and who are partially  covered by labour laws, and since 2004 by collective bargaining, with access to the labour courts in cases of disputes. The processes of juridification of working relations and judicialization of disputes launched by state regulations, she shows, have transformed the capacities, occupational status, and identities of home-based child care workers, from mothers who are paid to look after the children of other mothers, but who are not concerned about low job status, to professional care workers with specific  employment and social protections, and resources for enforcing these.

1.9 M  ain Contributions and Future Research Issues The journey undertaken to explore the dynamics of established welfare markets across sectors and types of welfare states brings us to underline three main contributions of this volume—first, the resilience of welfare markets, even to survive their own failure; second, the relations between welfare markets and other types of social orders; and third, how external

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shocks affect the dominance of specific actors. We conclude this discussion of the main contributions by mapping out the research agenda that emerges from this volume.

1.9.1 The Resilience of Welfare Markets In all the cases analysed in this volume, welfare markets have been introduced and developed through institutional layering processes rather than through a paradigmatic change in the established welfare state institutions. Nonetheless, the different types and combinations of policy instruments matter for the dynamic development of welfare markets and their form of persistence. Despite differing levels of success, despite their failure, external shocks, scandals and criticism, the welfare markets studied in this volume remain in place and have shown resilience. Even where markets fail, in the sense of stagnating or falling short of covering the neediest populations, the market as a form of provision persists. For example, the German pension market has continued to be reformed in new directions as a result of policies directed towards a well-­ established financial sector, in spite of the market’s glaring underperformance; the French pension markets have shown their adaptive abilities by activating private firms, and creating new investment options. Where welfare markets entail the creation of a formal labour supply, however, financial incentives for using services is best coupled with regulatory instruments aimed at formalizing the labour supply. Explicitly formalizing labour and extending established regulations activate the interests of trade unions and employers’ organizations. The comparisons in this book suggest that more unpaid labour will be shifted to the market as labour markets for domestic/care labour become more formalized and standardized. Yet, hidden welfare markets may co-exist alongside formalized segments. Welfare markets are not immune to scandal, as in the case of the Swedish pension scheme. The way in which they develop may also have unintended effects, as in the ways in which gendered divisions of labour in Germany tend to be re-traditionalized. Nevertheless, scandals, unintended consequences, and outright opposition have led to policy

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adaptations and renewed implementation, rather than the demise of welfare markets. In Sweden and France, the welfare markets for care/domestic work thrive, in part by converting to more redistributive mechanisms within an overall market framework. Yet, so far, welfare markets have not replaced public provisions and protections, at least not in the European Union member states surveyed in this volume. In fact, they have either layered onto existing social protections (pensions) or extended into domains that have not traditionally been covered by welfare states in many countries—such as home-based care for young children and elderly adults, or the provision of domestic labour—while keeping traditional forms of family support in place. Thus, even the very well organized markets for home-based elderly care in France depend heavily on family members for recruiting and managing hired care labour. We acknowledge that the crowding out of public provision of care by welfare markets may occur in countries in which such public care provision has been more developed, for example, in Scandinavian countries (Andersson and Kvist 2014). These findings lead us to stress the high degree of resilience of welfare markets once they have been established. We borrow the concept of resilience from Vivien Schmidt and Mark Thatcher, who use the term to characterize the persistence of neo-liberal ideas across different policy fields and political contexts, where market ideologies “endure, recur or adapt over time”, outlasting challenges of rivals, and surviving despite their own apparent failure (Schmidt and Thatcher 2013, pp.  13–16). Tailored to the study of welfare markets, we define resilience as the persistence and adaptability of market policies and practices in a generally market-sceptical social realm infused with principles of social justice and distributional equality. In part, the resilience of welfare markets may be explained by their adaptability, the wide variety of interests that stand to be activated by the unique configuration of each welfare market, and by the feedback effects (Pierson 1993) of policies. The emergence of new actors, in the form of enterprises, employers’ organizations, and consumer interest groups feed back into policy processes for reinforcing market instruments (especially evident in the French domestic/care sector). The users of services have also become accustomed to the private services/benefits they receive, and

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as a result, welfare markets have become legitimated. Even in the more gender conservative German and Dutch cases, families have now come to depend on paid domestic/care services, which a generation before, might have signalled a failure of the family as an institution and of women in their roles as housewives and caregivers.

1.9.2 M  arkets in Welfare in the Long Run: Families, Citizens, and the Welfare State The continuity (or at least a lack of disruption) that emerges from the resilience of welfare markets shifts the relation between market, public, and familial dimensions in ways that are more complex than theories of institutional change suggest and that can have important effects in the long run. What is at stake is not only the conversion, drift, or displacement of established and formal institutions, but also the prevailing assumptions about what states do, what families do, the effects of welfare markets on traditional categories like male breadwinners securing family livelihoods, and women devoted to the care of their families. Moreover, the competitive offers that are traded in welfare markets change the mind-sets of those who may buy their products and services, but not everyone is able to adapt to the market game. Disorientation, anxiety, and fear are just as equally outcomes of welfare markets, as are new identities as consumers with choices and opportunities. Welfare markets in fact, seem to require ‘more state’ in the sense of regulatory as well as financial or informational policy instruments, if they are to benefit citizens with fewer dispositional and material resources for engaging in market risks. Even where the state is not dominating the market, if states fail to regulate or properly inform citizens about welfare markets, the result may not only be the stagnation of welfare markets, but endangering the trust of citizens in public administration. The contributions to this volume show how welfare markets converge and diverge in unexpected ways, even within the same sector and country. For example, in the Netherlands, a demand-side financed child care sector exists in parallel with a supply-side financed market in elderly care, with different outcomes for work and employment conditions. In very

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different countries like Sweden and Spain, similar market drawbacks become visible, for example, in the precarious employment situations of migrant care workers. Traditional types of welfare states are cross-cut, while different dynamics of public, market, and family welfare exist within one country across welfare sectors. Nevertheless, even if cross-national differences in welfare markets do not align with the established typologies of welfare states, the dynamics of welfare markets are not totally independent from traditional welfare institutions. Especially the development of domestic/care markets in Germany suggests that familialism continues to shape the dynamics of welfare markets for home-based child and elderly care, and for domestic work. Beyond the mid-term perspective, we see how welfare markets could transform welfare states in the long term, by changing their context, at the interest representation level, and at the exchange and production level. We have observed new actors participating in welfare policy debates: insurance companies, consumer organizations, new economic segments, and employers’ organizations, alongside non-governmental organizations, such as migrant rights groups, with whom in some contexts, trade unions cooperate. At the exchange and production level, for-profit companies, which had been absent from certain sectors of the welfare landscape now operate there. All these transformations may have important long-run consequences for weakening welfare state principles of redistribution and social justice, though we see this as depending on the political direction of welfare market regulations.

1.9.3 External Shocks and Dominant Actors Welfare markets are intrinsically vulnerable to economic shocks, which would not be the case in the same manner if these services had been publicly provided. The welfare markets covered in this volume have been subject to two major shocks over the past decades—the financial crisis starting in 2007 and the Covid-19 crisis unfolding just as we prepare to submit this manuscript in Spring 2020. The effects of these crises however, are uneven, across sectors, types of policy instruments, and market

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actors. Surprisingly, the private pensions schemes in France and Germany have not been adversely affected by the financial crisis, beyond the fact that declining interest rates have made savings plans less attractive to consumers. Instead, state responses to the financial crisis in the form of austerity measures have more adversely affected the domestic/care markets, especially in the case of demand-side financial instruments and in relation to overall cuts in state subsidies. Thus, the child-care market in the Netherlands and the domestic labour market in Spain have been more adversely affected than elder care in the Netherlands and France. The comparison of home-based domestic/care labour in Germany and France suggests that informalized employment relations in private households amplify the employment risks faced by workers. Such comparative differences are becoming visible in the Covid-19 crisis too, with many home-based services for child care and domestic labour stopped in the countries where labour relations are largely informalized. Meanwhile, as a result of the public health crisis, the relatively poor wages and harsh working conditions of home-based elder care workers are receiving wide attention in countries like Germany, which have long tolerated gender segmented labour markets. If welfare markets can survive these shocks, crises at least have the potential to change the balance of power between actors in these markets. While the intersection of financial, regulatory, and informational instruments are key to understanding how redistribution and power relations are shaped, the chapters do not point to any simple relation between forms of financial policy instruments (demand- versus supply-side subsidies or credits) and the advantaging of one group of actors over another. Regulations instating labour rights for mothers’ assistants (assistantes maternelles) and the mobilization of the profession as a group have been the key factor in balancing the power of users and workers in the exchange of home-based childcare in France. In a similar light, the overall emphasis in France on building an elderly sector of provider organisations, rather than a sector based on direct employment of domestic/care workers by households, means that even when elderly call upon direct hires, an intermediary provider organization can be hired to help them in doing so. In this way, service provision is simplified and low-income households are better enabled to use these services, despite their predispositions against ‘hiring help’ (compared to wealthier households,

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which have always done so). These findings also underline the importance of paying attention to the labour dimension of a welfare market, where the combination of financial and regulatory instruments, and a balanced distribution of power among market actors clearly lead to a more vibrant welfare market, higher quality, professionalized welfare services, and the better integration of care workers into existing infrastructures of industrial relations, collective bargaining and labour standards.

1.9.4 Exploring the Future of Welfare Markets While this volume contributes insights into the interactions of different policy instruments, and the role of actors in developing welfare markets founded on the basis of these policies, more research is needed on the outcomes of these interactions especially for allocative and distributional dimensions of welfare markets. We suggest that welfare markets do not simply mean the creation of new inequalities on the basis of winners/losers in market competition. This is because sustainable welfare markets involve ‘more’ rather than ‘less’ state, and policy instruments potentially support the capacities of weaker actors, including users as consumers, workers as service providers, and private individuals as employers. While anything that contributes to the resilience of markets may be seen as undermining socialized public provision, especially in the field of domestic/care labour, welfare markets can also take on tasks that had been hidden behind highly unequal gendered divisions of labour. Thus, the question is how to embed marketization and how to legislate restrictions on the commodification of welfare service labour. Financial instruments alone can amplify existing inequalities, while pairing these with regulations improving protections, and with information empowering users and workers potentially mitigates inequalities and may even serve to protect against economic shocks. These dynamics deserve more systematic analysis. A strong contribution of this volume is its comparative approach—both cross-sectoral and cross-national. The lines of convergence and divergence we undercover are a second dimension where more research is needed. The emphasis on the labour dimensions of welfare markets suggests extending the comparative sectoral analysis to other labour-­intensive welfare markets,

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such as private health care and private employment services. The range of countries covered in this volume has been limited, in part by the corpus of existing research on welfare markets. There seems to be a focus especially within the welfare research communities on social-­democratic and conservative welfare states. The inclusion of Southern European and Eastern European countries in this volume should be expanded, with a focus on intra-regional variations, but also  on the role of local governments, and broader cross-national, cross-sectoral analyses. Finally, crises, both financial and public health, provide natural experiments for teasing out the vulnerabilities and strengths of welfare markets in cross-national and cross-sectoral variations. In the context of the Covid-19 crisis in 2020, countries like Germany are promising reforms of welfare service labour markets in elder care and health care to improve wages and working conditions, and to bring these sectors more in line with traditional institutions of collective bargaining and industrial relations. Likewise, European discussions about a European fund to finance the recovery from the Covid-19 crisis especially in Southern European member states indicates a degree of learning from past mistakes, when austerity was mandated and cut-backs in state financing and the de-­ regulation of welfare labour caused a systematic under-investment in public health facilities in countries like Spain and Italy. Our evidence suggests that the most sustainable welfare markets may be located in the least neo-liberal-market European welfare economies.

Notes 1. The consumer can here be considered as the one who pays for the service and the user the person who benefits from the service. 2. Note that Esping-Andersen’s typology is a theoretical construct. In practice, ‘market’ provision was often already financed by the state in some way (see accounts of US social policy), meaning that welfare markets have existed for a long time, especially in more liberal welfare states. Moreover, conservative welfare states have often relied on the non-profit sector for welfare provision without operating in a real market structure (Bahle 2003).

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3. In practice, it is often difficult to distinguish between the forms of home-­ based care and domestic work, with care work often including domestic labour like cleaning and cooking at the client’s home. In the case of care, market services may mean care provided in someone else’s home (see van Hooren Chap. 14; Apitzsch and Shire, Chap. 13; Cartier, Chap. 15).

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Le Grand, J. (1991). Quasi-Markets and Social Policy. The Economic Journal, 101(408), 1256–1267. Leibfried, S., & Obinger, H. (2000). Welfare State Futures. An Introduction. European Review, 8(3), 277–289. Lutz, H. (2011). The New Maids: Transnational Women and the Care Economy. London: Zed Books Ltd. Mahoney, J., & Thelen, K. (dir.). (2010). Explaining Institutional Change: Ambiguity, Agency, and Power. Cambridge: Cambridge University Press. Marchetti, S. (2014). Black Girls: Migrant Domestic Workers and Colonial Legacies. Boston: Brill. Meagher, G., & Goodwin, S. (Eds.). (2015). Markets, Rights and Power in Australian Social Policy. Sidney: Sydney University Press. Mettler, S. (2011). The Submerged State: How Invisible Government Policies Undermine American Democracy. Chicago: University of Chicago Press. Morel, N., Touzet, C., & Zemmour, M. (2018). From the Hidden Welfare State to the Hidden Part of Welfare State Reform: Analyzing the Uses and Effects of Fiscal Welfare in France. Social Policy & Administration, 53(1), 1–15. Naczyk, M., & Palier, B. (2011). France: Promoting Funded Pensions in Bismarckian Corporatism? In B. Ebbinghaus (Ed.), The Varieties of Pension Governance: Pension Privatization in Europe (pp. 89–118). Oxford: Oxford University Press. Noordegraaf, M. (2015). New Governance and Professionalism. In T. Klenk & E.  Pavolini (Eds.), Restructuring Welfare Governance: Marketization, Managerialism and Welfare State Professionalism (pp. 121–144). Cheltenham/ Northampton: Edward Elgar Publishing. Nullmeier, F. (2001). Sozialpolitik als marktregulative Politik. Zeitschrift für Sozialreform, 47(6), 645–667. Palier, B., & Martin, C. (2008). Reforming the Bismarckian Welfare Systems. Oxford: Blackwell. Pieper, J. (2018). Private Sector Provider Power in Welfare State Politics. Cham: Palgrave Macmillan. Pierson, P. (1993). When Effect Becomes Cause: Policy Feedback and Political Change. World Politics, 45(4), 595–628. Pollard, J. (2011). L’action publique par les niches fiscales. L’exemple du secteur du logement. In P. Bezes et A. Siné (Ed.), Gouverner (par) les finances publiques (pp. 265–297). Paris: Presses de Sciences Po. Ranci, C., & Pavolini, E. (2013). Reforms in Long-Term Care Policies in Europe: Investigating Institutional Change and Social Impacts. New York: Springer Science.

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Open Access  This chapter is licensed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/ by/4.0/), which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence and indicate if changes were made. The images or other third party material in this chapter are included in the chapter’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the chapter’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copy­ right holder.

2 Changing States, Changing Citizens, Changing Politics? Jane Gingrich

2.1 Introduction Despite ongoing claims of widespread of ‘crisis’, ‘retreat’, and ‘retrenchment’ of the welfare state (Gilbert 2002; Streeck and Mertens 2013), in 2018, the 31 OECD countries devoted over a fifth of their GDP to public social expenditure. Indeed, even in the long recovery from the financial crisis, and the turn to fiscal austerity, social policies remain a robust spending item across the OECD and crucial to citizen welfare. These aggregate figures, however, conceal a widespread transformation in how social protection is distributed, regulated, and provided. While traditional social insurance programmes (e.g. pensions, unemployment insurance) and public services remain the largest spending items, new modes of financing and provision have become increasingly important. Policymakers across OECD countries have turned to reforms

J. Gingrich (*) University of Oxford, Oxford, UK e-mail: [email protected] © The Author(s) 2021 C. Ledoux et al. (eds.), The Dynamics of Welfare Markets, Work and Welfare in Europe, https://doi.org/10.1007/978-3-030-56623-4_2

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encouraging private spending on social welfare, expanding the use of fiscal instruments and tax credits, and employing private providers in the delivery of welfare services. As Ledoux, Shire, and van Hooren argue in their introduction, welfare markets are ‘politically shaped, regulated and state supported markets, which provide social goods and services through the competitive activities of non-state actors’. This chapter looks to conceptualize how changes in the state through markets can have multiple distributive and political implications in the electoral, bureaucratic, and productive spheres. The following pages document the diversity in basic patterns of public and private involvement in the financing and provision of welfare and education services, and then turn to conceptualizing a range of distributive and political implications of these changes.

2.2 What Are Markets in the Welfare State? Across advanced welfare states, there is substantial variation in how governments finance and deliver public services. Figure 2.1 demonstrates variation in education funding and provision across a number of OECD countries for secondary schools, with the lines on both axes representing the mean level in 2010.1 The clustering of countries in the bottom left quadrant shows that a majority of countries maintain both extensive public financing and delivery of primary and secondary education. Those in the bottom right are largely publicly provided, but have an above-average amount of private finance. Other countries show a mix of private provision and funding. In the top left quadrant, we see Ireland and Belgium, where most schools are non-public but entirely dependent on the state for funding. In the top right quadrant, countries like Korea and Australia combine a large number of publicly financed private schools, with a sizeable fee-paying private sector (about a third of schools in both cases are privately funded).2 Figure 2.2 maps a similar diversity in health care (these data should be interpreted with some caution, given the definition of ‘private’ varies across place, in some cases only including for-profit). Although the countries are less evenly spread across the four quadrants, again we see that a number of countries continue to maintain largely publicly run hospitals

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Fig. 2.1  Secondary education in 2010

and fund health care through public funds (both social insurance and general government revenue). Others combine private financing and private delivery differently. Both Greece and Portugal have relatively large amounts of private spending with government control of hospitals, whereas Germany has a large privately provided sector with average public expenditure (these providers are largely non-profit organizations).3 Most of these differences across countries are long-standing, dating back to the early to mid-twentieth century. For instance, the Netherlands has had a large privately run education sector since the extension of compulsory schooling. Others, however, are more recent. Sweden has seen private schools grow from almost none in the 1990s to 14 percent of compulsory schools in 2015 (Gingrich 2019). Two major policy mechanisms can sustain or increase privatization of the finance or delivery of welfare services.4 States, as the introduction lays out, have often actively introduced reforms either expanding private financing or provision in both developed programmes—like the

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Fig. 2.2  Configurations of public and private financing in health, 2010

above-mentioned health and education—or in emerging programmes. In the area of elderly and child care services, the expansion of public activity is a more recent phenomenon. Here, the use of market reforms has often accompanied a growth, rather than a retrenchment, of the state. Indeed, in many cases, it simultaneously supported an expansion of the market— with public spending encouraging the shift in provision from the family and into the market.5 In child and elderly care services (and sometimes core health and education services), this type of more active encouragement of the private sector often draws on market-based policies directly supporting the purchase of private welfare services through tax credits or other forms of ‘fiscal welfare’. Fiscal welfare refers to the provision of tax subsidies to achieve social ends (Morel et al. 2016; Sinfield 2018). Both defining and measuring fiscal instruments (as opposed to direct spending) is complex, but in general, ‘fiscal welfare’ refers to a range of tax instruments aimed at providing income support, or supporting the purchase of private

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insurance or the purchase of private services. Across OECD countries, these benefits include forgone tax collection on existing social transfers, tax splitting across family members, tax deductions for the purchase of private insurance or services, and more recently, tax credits that are at times fully refundable. The use of tax instruments is hardly new. Richard Titmuss (2018) pointed to the use of fiscal welfare in his classic essay on welfare provision, and many countries have long used a variety of tax instruments. These benefits are most prominent in the United States, where a large number of veto points and more limited support for direct spending have pushed policymakers across the political spectrum towards tax-based instruments for welfare (Faricy 2015; Howard 1999; Mettler 2011). However, the use of fiscal welfare extends well beyond the United States. Figure 2.3 shows one measure of use of fiscal welfare across the OECD in 2013 (OECD 2019; Adema et al. 2011). Some countries, like Korea, use both tax breaks and private mandatory spending. Others, like Finland, AUS AUT BEL CAN DNK FIN FRA DEU GRE IRE ITA JPN KOR LUX NTH NZL NOR PRT ESP SWE SWZ GBR USA 0

5 % of GDP Tax Breaks for Social Purposes Tax Breaks for Pensions

Fig. 2.3  Fiscal welfare across the OECD

10 Private Mandatory Spending

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use almost no such measures. Most countries take a middle path, devoting 1–3 percent of GDP on explicit tax breaks for social purposes, a figure that does not include foregone taxes on social insurance expenditure, which, in many respects, is the most prominent and important method of providing fiscal welfare. Looking at the same data over time, Fig. 2.4 shows a slight increase in tax breaks for social purposes as a percentage of GDP through the 2000s, with a dip following the financial crisis. Tax breaks, while hardly rivalling direct spending, thus form an important component of the welfare state even outside of the United States (Touzet 2019).6 Moreover, as Morel et al. show (2016), in some countries, in emerging areas like family policy, substantial portions of new spending goes through fiscal welfare programmes. Second, governments can also directly support the private provision of services—or as I argue elsewhere, introduce competition in public services that mimics private services (Gingrich 2011). Here, governments can contract services or allow funding packages where money follows the

Fig. 2.4  Over time developments in fiscal welfare

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user from the public to the private sector. In a wide variety of services, from prisons to job-seeker services, governments use the former mechanism. In this case, the state itself (national or sub-national) is the effective buyer of the services, allocating money to private providers through contracts. For instance, in the United Kingdom, the National Health Service (NHS) England allows local health authorities to contract with private hospitals and clinics for publicly funded health services. Equally, governments often use the latter mechanism by introducing a voucher or quasi-­ voucher funding model. In Sweden, for instance, pupils can choose a public or private school, with public funding following their choices. Both fiscal welfare and direct support of the private sector often blur the lines between public and private—with the state both funding services and supporting private actors. Do either long-standing differences or more recent changes in the public-private mix systematically affect its politics?

2.3 W  hat Political Dynamics Emerge from Welfare Markets? Classic typologies of the welfare state have looked to conceptualize the way that policy embeds and institutionalizes varied relationships among states, citizens, workers and families, and markets (Castles and Mitchell 1993; Esping-Andersen 1990; Orloff 1993). At the core of this work is a dual claim. First, configurations of welfare policies have implications— both direct and indirect—for the distribution of resources across groups. Second, these distributive outcomes shape future power dynamics: the politics of the welfare state follows in part from its design. In welfare markets, these distributive and power relationships span across three sets of domains: (a) the electoral domain—between state and citizens; (b) the bureaucratic domain—between state and producers of services; and (c) the productive domain—between producers and citizens. Figure 2.5 schematizes these relationships. I argue that in order to think about the downstream implications of welfare markets, it is worth considering the ways in which markets recast the distributive

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A: State

Bureaucratic Domain D2 – Benefits to Firms P2 – Political influence of producers

Electoral Domain: D1 – Preferences for welfare P1 – Accountability of the state

C: Producers

B: Citizens Productive Domain D3 - Distribution of quality P3 – Influence of users

Fig. 2.5  States, citizens, and producers

relationships (marked by a ‘D’ in Fig. 2.5) and the power relationships (marked by a ‘P’) in each of these three domains (Gingrich 2015). When it comes to the marketization of welfare services, one potential interpretation is that they constitute uniform retrenchments of the welfare state. In this framing, welfare markets are posited to produce regressive distributive implications and reshape power relationships among the state, producers, and citizens in ways that reflect the interests of the wealthy. In the terms schematized in Fig. 2.5, this framing suggests that market reforms increase inequality and reduce support for the state (D1) while also disempowering the bulk of citizens vis-a-vis the state (P1) in the electoral domain; provide profits to firms (often without benefiting front-line workers) (D2) and empower firms politically vis-a-vis the state (P2) in the bureaucratic domain; and create a system in which market transactions dominate, benefiting a smaller sub-group of wealthier citizens (D3) while leaving many citizens unable to influence services (P3) in the productive domain.

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The sections below argue that these claims are often well founded— but not always. Indeed, a central claim of this volume is that markets can be structured differently. In order to think about this variation, the following pages spell out the conditions under which these distributive and political outcomes are likely to emerge in each domain.

2.4 T  he Electoral Domain: Citizens and the State Do welfare markets change what citizens see as the legitimate scope of the state? In an era of markets, do citizens still see political institutions, especially voting, as a way of holding governments to account for public services? Marketizing reforms, particularly those that extend private financing, fundamentally alter the boundaries of public responsibility. In so doing, they can place more risk on individuals and families for securing their own well-being, recasting what citizens can expect to receive from the state (D1). At the same time, markets that reshape the delivery of services—or in the case of pensions, the administration of savings and investment—can alter the underlying accountability mechanisms behind public services (P1). The following section argues that welfare markets can both increase the risks borne by citizens and reduce their capacity, as voters, to hold the state accountable for these distributive shifts. However, in contrast to a neo-liberal framing, markets do not always have these effects. To understand when markets are likely to have fragmenting and de-mobilizing effects, we need to conceptualize how varying markets reshape the politics of distribution and voter accountability.

2.4.1 T  he Distribution of Risk (D1) and the Political Demands of Voters The extent to which the state taxes and spends varies across contexts, but in nearly all contexts, social programmes involve some pooling of income

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risks across citizens. Historically, one of the reasons individuals pooled risks through public programmes was the absence of well-developed private markets. This absence meant that in practice individuals had to choose between non-coverage and public coverage. Where the marketization of benefits allows citizens to ‘opt out’ of public risk pooling, either by supporting private pension savings or supporting the private purchase of targeted services in the public sector, it can change this calculus. The following section outlines the intuitions behind the ‘opt out’ claims, but also argues that not all marketizing reforms have these characteristics. A voluminous literature has emerged in recent years examining public preferences for social spending on programmes that address labour market risks (Iversen and Soskice 2001; Rehm 2016) and attitudes towards redistribution generally (Kenworthy and Pontusson 2005; Lupu and Pontusson 2011; Rueda and Stegmueller 2015). Much of this literature points to the material basis for demands on the state as jointly stemming from an individual’s economic circumstances and the broader distribution of risk/income in society. For instance, Rehm argues that both an individual’s risk of an income shock (i.e. unemployment risk, risk due to illness) and the overall distribution of such risks across occupational groups shape the demand for social spending. Where individuals face a higher risk, they will prefer to pool this risk with others, whereas lower risk individuals will resist such pooling, preferring instead to self-insure. Where individuals face similar risks, or where low-income and high-risk groups can band together (Rehm et  al. 2012), more extensive benefits follow. Where the public sector provides a uniform quality of benefits to recipients, then as long as private alternatives are not available, both higher and lower risk citizens will support the system, and push for it to improve to meet their demands. Once private alternatives exist—or more targeted alternatives within the public sector—higher income/lower risk citizens may see them as a cheaper way to achieve their preferred quality level, as they no longer need to pool resources with lower income or higher risk voters to achieve high-quality services (Busemeyer and Iversen 2014, 2020). Where risk pooling becomes more fragmented—either because higher income/lower risk citizens can now opt out of a common

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risk pool through private insurance or through targeted privately provided goods—then those left in the common pool are likely to face worse quality or higher costs, whereas those outside the common pool now have access to a higher quality or lower cost alternative. The underlying logic of the argument suggests that the presence of private alternatives, even within largely public systems, can operate as a disruptive of underlying support for the state where it fragments risk. Where lower risk groups can receive a cheaper equivalent good from the private sector, their demand for a pooled public insurance falls. Self-­ insurance thus alters the logic of support for the welfare state (Ansell 2014). Citizens without access to private alternatives now face increased insecurity within the public system—leading them to support more spending. By contrast, those outside have little incentive to pool risks, they are receiving a targeted alternative, reducing their support. In other words, where marketization creates what Paul Pierson (1993) calls an instrumental feedback—altering the material incentives families or individual voters have to support greater state spending—then they are likely to fragment support for it.7 Testing the relationship between markets and future distributive demands on the state empirically has proven extremely difficult. Not only is public policy partly endogenous to public preferences, but the public-­ private mix in financing at any given point in time is the product of behaviours that build on attitudes about the system. Very few marketizing reforms require individuals to opt out of the public sector, thus the relative balance of private spending at a given moment comes in part from a series of individuals ‘voting with their feet’ and moving to the private sector. As such, empirical analyses that correlate existing levels of public-private mixes with current attitudes suffer from serious econometric identification problems. Several studies focusing on single cases have tested these claims with more clearly identified designs. Diana Burlacu’s (2016) work examines the effects of opting for private actuarial health insurance in Germany, using a regression discontinuity design drawn from the German Socio-­ Economic Panel. Burlacu examines a discontinuity around the income threshold for eligibility for German private health insurance to estimate the effects of receiving insurance on voting behaviour. She finds evidence

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of a causal effect of private insurance on a right-ward move in preferences, over and above the income-based effects driving selection into insurance. Working in the other direction, Lerman and McCabe (2017) use a similar design to study the expansion of the 2010 Affordable Care Act in the United States finding slow but developing positive feedbacks from the receipt of public funds. Together, this work suggests that while marketization has an ambiguous effect on average support for the state—since it may increase support among some and reduce it among others—it does have the potential to drive the preferences of the rich and poor (or low-risk and high-risk groups) apart, creating more material polarization in citizens’ basic support for the state. These effects though, depend on a particular type of marketization, one that shifts risk downwards to citizens. For instance, Busemeyer and Iversen (2014, 2020) argue that public systems that provide more fragmented benefits to their citizens (i.e. those with less pooling to start with) may be better able to withstand these pressures. Here, higher income citizens already receive more targeted (less pooled) benefits. Jæger (2006) finds that support for the welfare state is least polarized across income and risk groups in social insurance systems, in which public programmes crowd out private ones but where there is lower risk pooling. These claims echo long-standing arguments in the welfare state literature about public ‘opt in’, in particular, Korpi and Palme’s (1998) classic argument about the ‘Paradox of Redistribution’. Marketization then, where it fragments risk pooling, is likely to have substantial implications in terms of distribution of demands on the state. However, where marketization occurs alongside an ongoing common risk pool—that is, by allowing some differentiation in service provision but not continued public regulation and financing—the effects are more ambiguous.

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2.4.2 M  arkets, Information, and Electoral Accountability (P1) A second argument about the way markets reshape the electoral relationship between citizens and the state looks at the relationship between market structures and public accountability. The link between information and accountability is crucial to most models of voting. The basic idea that citizens reward or punish incumbents for good performance or policies rests on the claim that individuals know who is responsible for a policy and have the ability to sanction/ reward them. Powell and Whitten’s (1993) classic study on institutions and economic voting argues that where institutions complicate the logic of attributing responsibility, largely through coalition governance, individuals put less weight on economic performance in voting. In other words, as the informational burden on voters in identifying who to blame or reward for performance grows, voters are less likely to weigh their perceptions of performance heavily in determining their vote choice. Powell and Whitten focus on institutions as providing or obscuring the ‘clarity of responsibility’ for economic and policy outcomes, but other theoretical work, for instance, Arnold’s (1992) classic study of the behaviour of the US Congress, suggests that policy is an important provider of information (see also Kumlin and Stadelmann-Steffen 2014). This work suggests that policy design can matter for how citizens hold governments to account. How then do markets affect accountability? It may occur through this informational channel. Suzanne Mettler (2011) has powerfully argued that policies can vary in their ‘submergence’, the degree to which citizens can connect the policy to the political process. Mettler suggests that policy can provide information to voters, which in turn, crucially structures what they know about government. In the US context, there is a long history of work pointing to ‘hidden’ social policies (Howard 1999). While much work, including Mettler’s, points to the tax system as key to determining the submergence of social policy, others point to the marketization of the delivery side. In their work on prescription drug reform in the United States, Kimberly Morgan and Andrea Campbell (2011)

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argue that its ‘delegated’ nature, meaning the privatization of delivery, fundamentally shapes its politics. Morgan and Campbell, like Mettler, show that programme design reduces the information that voters have about state responsibility for the programme, undercutting the ‘reward’ mechanism between policy expansion and voting. Work by Lerman and McCabe (2017), suggests that the informational effect of policy experiences is particularly important for low-information voters and those less ideologically presupposed to supporting the policy. Where marketizing reforms obscure information about responsibility, does it matter for how citizens’ basic demands on the state shape their participation in the political process? To put this more concretely, how much does a voter’s attitude towards the welfare state, the health system, or other policies actually matter for their vote choice? Building on Mettler, I examine this question in a cross-national analysis of voting behaviour, showing that in countries with more visible welfare states, by which I mean those that use more direct spending versus tax-based spending, citizens weigh their economic preferences more heavily than in welfare states with less visible structures (Gingrich 2014). For voters in a high visibility welfare state like Sweden, attitudes towards redistribution predict vote choice nearly twice as well as such attitudes in a low-visibility state like Japan. Moreover, there is evidence that this effect occurs for informational reasons. Citizens in more visible welfare states are more able to correctly place parties on a left-right spectrum, are more likely to name welfare issues as salient, and are more able to answer questions about welfare benefits. Information then shapes whether individuals see the democratic process as the place to act on their welfare preferences. If marketization— through either privatization or new structures of governance—obscures the link between the information gained from service experiences and public responsibility, it might lead voters to de-­ prioritize these experiences in their voting behaviour. Citizens might love or detest their child’s private school for instance, but not be entirely sure who is responsible for it: the private actors who provide them or the government that sits behind the system as a whole. In other words, markets can produce informational complexity that obscures the clarity of responsibility.

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Political competition likely matters for how these dynamics play out. Returning to Powell and Whitten (1993), part of the accountability logic lies in the informational environment, how easy it is for citizens to connect an economic experience to the state, whereas part lies in citizens’ perceptions of the choices that are available. In order to act on their economic or other experiences, citizens must not only view the state as legitimately responsible for them, but they need to perceive their voting choices as meaningful. Where citizens see governments as having less ‘room to manoeuvre’, the economic voting literature suggests that they again de-prioritize economic motives (Hellwig 2008). A similar logic may emerge around policy. If all political actors adopt a technocratic pro-­ market approach—a claim often levelled against contemporary politicians—then even if citizens do view the state as responsible for their service experiences, they have little scope to act on these experiences. In a study on disability privatization in the United Kingdom, Sara Watson and I investigate the complexity of holding governments to account for privatization (Gingrich and Watson 2016). We examine the geographically staggered introduction of private providers of employment services for people with disabilities under the centre-left Labour government. Overall, these reforms were relatively punitive, creating more restrictive conditions on individuals regarding work, and there is some evidence that private actors were even more punitive than equivalent public actors providing the same services. In a standard model of political accountability, we would expect recipients of disability programmes to punish the incumbent, and this punishment to be particularly pronounced in regions with private providers. What Watson and I find however, is that the punishment logic only holds in Scotland and not in England. Using a difference-in-difference set up, we find that in England, disability recipients in regions with more private providers were slightly more likely to vote for the Labour Party than recipients in the public regions. In Scotland, the relationship is reversed, with recipients more likely to vote for the Scottish National Party (SNP) than recipients in public programs. We argue that privatization can create a dilemma for voters when its ideological effects and accountability effects create a cross-pressured environment. Under these conditions, disability recipients face new insecurities, pushing them to

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the left ideologically, yet at the same time, in order to punish the incumbent Labour government, they are pushed to the right. In ‘private regions’, the result was a de-emphasis on the accountability logic, as weaker information and greater cross-pressuring led voters to avoid punishment. In Scotland, where the SNP positioned itself to the left of Labour on disability, voters had more options, and were able to engagement in punishment. Taking this work together, we can draw several conclusions. The legitimacy of the state as a forum for resolving social problems requires voters to (a) connect the problems they see to the state and (b) see a meaningful political solution to them. Where the structure of policy obscures information about who is responsible for outcomes, or the structure of political competition leaves voters with few alternatives, then voters are less likely to turn to the state to address emerging problems or to reward it for successfully doing so. Since markets often affect the clarity of responsibility and the options available, they can lead voters to de-emphasize the affected policies in political behaviour. These are much more akin to what Pierson calls ‘interpretive effects’ of policy, not operating through a material channel, but an informational one. However, as the above discussion points out, these effects are not always uniform. Where markets provide a clearer logic of accountability to the voter, or political competition emerges around these reforms, market reforms need not obscure informational clarity. In sum, markets have the potential to alter the relationship signalled by line D1 and P1, by both polarizing attitudes while also reducing voter mobilization. But these effects are not uniform, where markets increase risk without obscuring responsibility, they could provoke a voter backlash; where they do not increase and keep voters aware, they may actually lead to political rewards from the middle classes. By contrast, both where they increase or reduce risk fragmentation in an environment of lower electoral clarity, the economic effects of markets may be felt less politically. Understanding these dual effects requires thinking about both shifts in risk (D1) and the information provided to citizens (P1).

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2.5 T  he Bureaucratic Domain: Producers and the State A second set of relations that welfare markets can reshape are those within the bureaucratic domain—between firms and workers and the state. These relations are relevant even for pensions, which are not traditionally thought of as a service, as private pension funds and providers can also have regulatory interactions with the state in the bureaucratic domain. Some argue that markets can provide benefits to firms, possibly at a cost to workers in the sector, placing employees in a more precarious position (e.g. Pollock 2004) (D2). Critics of markets further suggest that market reforms shift power to firms weakening the power of entrenched labour actors (proponents, by contrast, see this power shift as a desiderata of market reform (e.g. Moe 2011)) (P2). While many welfare market reforms do give private providers incentives to clamp down on costs and delegate power to them, once again, the following sections argue that the effects can be heterogeneous.

2.5.1 Private Rents, Workplace Fissuring (D2)? There are two distributive questions underpinning the shifts towards market provision and financing: how do these changes reposition private firms vis-a-vis the state? What incentives does this create for clamping down on worker wages? Whether markets provide rents to firms absent improvement, stimulate competition that improves quality/efficiency, or in fact align firms to the states’ regulatory goals, depends in part on the structure of the market and its relationship to the broader state architecture. Where market instruments are relatively unregulated, both in what qualifies for funding and in the quality of services, such reforms may shift resources from the state to producers. Rather than serving public aims, such as creating a sustainable pension system, ensuring access to high-­ quality child care, the market instrument may shift spending to particular incumbent firms. This concern is particularly the case where quality is

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multidimensional and difficult to monitor, as an unregulated market may not in itself ensure efficient competition (Gingrich 2011). Even under highly regulated quality, however, incentives for producers can vary. In many cases, support for private firms, through either fiscal welfare or direct contracting, can heavily clamp down on costs, meaning that private firms are operating at extremely tight margins. For instance, in contracting with the private sector for UK job seeking services through the now disbanded ‘Work Programme’ (2011–2015), contracts specified relatively ungenerous reimbursement rates that paid private firms based on the levels of placement. This shift both encouraged firms to engage in some ‘creaming’ of easy-to-place job seekers (Carter and Whitworth 2015), but also made the market hard to sustain, as many firms avoided competing for contracts or declined to renew them. Where states exert strong cost pressure on producers, or enhance competition among them, this pressure can reduce the ‘rents’ that producers may extract, but also gives heavy incentives to cut costs. These shifts can lead to workplace ‘fissuring’, where lower productivity and lower skilled jobs are hived off into separate firms, with less protected job tenure (more contract work) and lower wages (Weil 2014). For instance, Bosch and Thorsten (2018) argue that product market reforms, which were applied to non-welfare public services in Germany (e.g. rail, telecommunications), heavily affected the evolution of German inequality. In increasing competitive pressures on these sectors, firms were encouraged to clamp down on wages and draw on more temporary work. In this regard, even where firms do not extract rents from the state, workers may lose out. The above section argued that the distributive effects of markets on firms and workers can vary. In some cases, market reforms distribute rents to firms, particularly under conditions of weak oversight, but in others, they do not. While markets in services can exert pressure on workers, in many cases, the ‘status quo’ for workers (especially if they are in the informal sector) is not that favourable either. As van Hooren shows in her chapter on the domestic care sector in this volume, under some conditions, market instruments can bring an informal sector into the formal sector, providing more state oversight of quality and working conditions. Under these circumstances, market funding instruments may give the

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state levers to bring private actors into the regulatory orbit, aligning their interests with public aims.

2.5.2 Mobilization and Political Influence (P2) When it comes to the politics of market reforms, the singular interpretation of these shifts as largely empowering a small minority of organized market participants with few constraints is often accurate, but not universal. As Ledoux and van Hooren show in their chapters in this volume, much of the contestation occurs within ‘the market’ over how employers, firms, and workers themselves respond to new types of funding and regularize (or fail to) employment relations. Ledoux shows an interaction between the state and employers, with both influencing each other. In this framework, the question of how this relationship evolves politically requires looking at the organizational resources of both actors. Where there are mobilized producers and spending is relatively unregulated, market reforms are likely to cement and expand the power of existing producers, by increasing their incentives to lobby for resources from the state. Where existing incumbent firms are weak or non-existent, the structure of benefits can alter the way firms operate, bringing them into the orbit of state regulation and potentially regularizing employment relations for workers. Under these conditions, firms may become a powerful lobbying force, but their power does not necessarily undercut existing regulatory capacity. For instance, in the Swedish education sector, for-profit schools are classic ‘policy takers’—emerging as a lobby group in the wake of a liberalizing reform, rather than strong active proponents of it. Organizationally, private schools are now heavily mobilized and important players in the system. However, the Swedish administrative agency, and state more generally, maintains strong control of quality and inspection, and can continue to exercise this. In this regard, firms are powerful, but there are countervailing forces. Equally, on the side of workers, across the OECD as a whole, there has been a widespread decline of private sector unions (Visser 2013), and in some cases, market reforms explicitly limit the rights of collective

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bargaining and organizing (e.g. Charter schools in the United States (Green III et al. 2013)). Moreover, mobilization is often harder for workers who face many different diffuse employers, as compared to a single public sector employer. However, market reforms are not uniformly anti-­ labour. Van Hooren’s work develops this framework extensively, showing that the design of the market can provide different organizational resources to labour—in particular, where domestic labour is more visible and regulated, and workers are not working in the informal sector, they can have increased capacity to mobilize. In sum, welfare markets certainly often do entail a transfer of both resources and power from the state to the firms, but neither of these outcomes are universal, nor are producers a homogenous group. There is scope within the structure of the market to shape these relationships differently in the bureaucratic domain. Both the regulatory structure of the state and design of cost-incentives in production shape the distributive outcomes; equally, the degree of state capacity and favourability of rules of labour shape the balance of mobilization. Attention to these issues is crucial in thinking through the changes in state-producer relations.

2.6 T  he Productive Domain: Citizens and Producers Finally, welfare markets can change the way families and citizens relate to producers themselves, both in which citizens are attended to (D3) and the nature of reciprocal influence between producers and citizens (P3). These shifts are less overtly political, as the relationship between families and producers on the ground is often out of the direct arena of political contestation. It can, however, have political implications. The classic text on the relationship between individuals and organizations comes from Hirschman (1970). Hirschman famously argues that organizational members facing decline, can choose to respond through ‘exit, voice, or loyalty’. Markets work primarily through exit, democratic forms of organization through voice. When applied to markets in the public sector, the argument is that exit becomes an option for families or

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service users. In optimistic versions, the pressures exercised by exit forces market actors to compete and improve, creating more responsiveness (e.g. Chubb and Moe 1990). Scholars debate, however, the extent this outcome holds, and even where it does, what the downstream consequences are. Where welfare markets simply socialize aspects of private spending, they can effectively underwrite a market allocation of good and services (D3). In this model, those with more market power—which can be families vis-a-vis private household providers or financial firms vis-a-vis families—can cement their position. Since not all families are equally able to exit, markets can give those more capabilities, more power. These shifts can have political consequences. Where exit crowds out voice (Ranson 1993), it may reshape the way families and market actors interact, creating a more transactional and potentially short-term set of relationships. In this framing, some of the benefits of voice—repeated interactions based on trust—are lost. As a more transactional mode of relationship emerges, it can crowd out more ‘intrinsic’ motivations among workers, to draw on Julian Le Grand’s phrase, employees become maximizing ‘knaves’ rather than more traditional ‘knights’ (Le Grand 2003). Here, workers feel less vested in the production of public services, and act more as maximizing agents. However, once again, we see that the market instruments may alter these relationships in diverse ways. If we look at the state as structuring the relationship to citizens (D1/P1) and producers (D2/P2) in distinct ways, via the structure of benefits and regulation, these are likely to create different dynamics between citizens and producers. More regulation on the way workers and firms can operate is likely to make them less dependent on families and citizens, but also potentially less responsive. Equally, the way risk and accountability are structured, will shape whether poorer or more vulnerable citizens have equal existing opportunities. Together, the interaction of the state policies, family and firm responses, may lead four different configurations with varying distributive and political dynamics.

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2.7 Conclusion If market instruments are not a straightforward retrenchment of the state in favour of the market, but a set of instruments that can operate in different ways, the question is how to characterize their long-run effects on politics. Rather than seeing a homogenous set of outcomes, we have a range of new questions. Why do poorer voters (or their representatives) sometimes defend or expand market welfare and sometimes do not? Where markets fail is the state able to re-assert control? When markets thrive, why do workers in these sectors sometimes more successfully organize and sometimes do not? The effects of institutions are not mechanical, and the emphasis of the upcoming chapters is on how political dynamics within markets can matter, shaping them in varying ways. This chapter has argued that the details of regulation, financing, and incentives can shape the way markets operate differently, for citizens, firms and workers, and the state. It argues that to understand these differences, we need to think through how distributive and power relationships are structured in the electoral, bureaucratic, and productive spheres.

Notes 1. Spending and provision in pre-primary and tertiary education are more diverse, with greater private involvement in the financing and delivery of both (e.g. Garritzmann 2015). 2. The private schooling data are for secondary schools only, and are taken from the OECD PISA schools questionnaire, multiple years (OECD 2000–2015b). Private spending data are for primary and secondary schooling, and come from the annual OECD Education at a Glance series (OECD 2000–2015a). 3. The spending data are from the OECD Structural Health Accounts dataset, and the provision data are from OECD health database (OECD 2016). These data combine curative and long-term care. These data are supplemented data for the UK (Blackburn 2014) and a single observation for Sweden (Anell et al. 2012).

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4. Where the state cuts public spending—or chooses not to expand it in the face of changing social demands—citizens may also turn to markets or the family to fill their needs. Here, the absence of policy is correlated with the development of a large privately financed and provided sector. 5. As Frank Nullmeier shows in this volume (Chap. 5), the expansion of market reforms in pensions alters the public sector in distinct ways. The move towards expanding funded components of pension systems is often linked to cutbacks in PAYGO-funded insurance programmes (Stephens and Huber 2015). However, as Nullmeier shows, market reforms often underwrite the costs of this transition through tax credits that encourage private savings, thus re-deploying the state-market relationships in these domains. 6. The gap between the benefits provided by the most generous welfare states in Scandinavia and the more meagre welfare states, in spending terms, falls substantially when the tax system is accounted for, as many generous welfare states tax back 5–7 percent of GDP from fiscal transfers, whereas many Anglo-welfare states exempt social transfers from taxation, increasing their size in relative terms (Adema et al. 2011). 7. Non-instrumental feedbacks could produce similar outcomes. For instance, greater segregation of schools or health care could lead to lower levels of contact among citizens of different classes, reducing trust (Cammett et al. 2015).

References Adema, W., Fron P., & Ladaique, M. (2011). Is the European Welfare State Really More Expensive? Indicators on Social Spending, 1980–2012. OECD Social, Employment and Migration Working Papers, n° 124, OECD Publishing. Anell, A., Glenngård, A., & Merkur, S. (2012). Sweden: Health System Review. Health Systems in Transition, 14(5), 1–159. Ansell, B. (2014). The Political Economy of Ownership: Housing Markets and the Welfare State. American Political Science Review, 108(02), 383–402. Arnold, R.  D. (1992). The Logic of Congressional Action. New Haven: Yale University Press. Blackburn, P. (2014). Private Acute Medical Care: UK Market Report. Technical Report. London: Laing and Buisson.

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Bosch, G., & Thorten, K. (2018). Understanding Rising Income Inequality and Stagnating Ordinary Living Standards in Germany. In B.  Nolan (Ed.), Inequality and Inclusive Growth in Rich Countries: Shared Challenges and Contrasting Fortunes (Chapter 7) (pp.  153–175). Oxford: Oxford University Press. Burlacu, D. (2016, July). The Impact of Private Health Insurance on Political Preferences. A Regression Discontinuity and Longitudinal Analysis, (pp. 28–29). Conference Papers. Public Opinion and Policy Feedback Workshop Organised by Prof. Marius Busemeyer, University of Konstanz, Konstanz. Busemeyer, M. R., & Iversen, T. (2014). The Politics of Opting out: Explaining Educational Financing and Popular Support for Public Spending. Socio-­ Economic Review, 12(2), 299–328. Busemeyer, M.  R., & Iversen, T. (2020). The Welfare State with Private Alternatives: The Transformation of Popular Support for Social Insurance. The Journal of Politics, 82(2), 671–686. Cammett, M., Lynch, J., & Bilev, G. (2015). The Influence of Private Health Care Financing on Citizen Trust in Government. Perspectives on Politics, 13(04), 938–957. Carter, E., & Whitworth, A. (2015). Creaming and Parking in Quasi-Marketised Welfare-to-Work Schemes: Designed Out of or Designed in to the UK Work Programme? Journal of Social Policy, 44(2), 277–296. Castles, F.  G., & Mitchell, D. (1993). Worlds of Welfare and Families of Nations. In F. G. Castles (Ed.), Families of Nations: Patterns of Public Policy in Western Democracies (pp.  93–128). Aldershot: Dartmouth Publishing Company Limited. Chubb, J.  E., & Moe, T.  M. (1990). Politics, Markets, and America’s Schools. Brookings Institution Press. Esping-Andersen, G. (1990). The Three Worlds of Welfare Capitalism. Princeton: University Press Princeton. Faricy, C.  G. (2015). Welfare for the Wealthy: Parties, Social Spending, and Inequality in the United States. Cambridge: Cambridge University Press. Garritzmann, J. L. (2015). Attitudes Towards Student Support: How Positive Feedback-Effects Prevent Change in the Four Worlds of Student Finance. Journal of European Social Policy, 25(2), 139–158. Gilbert, N. (2002). Transformation of the Welfare State: The Silent Surrender of Public Responsibility. New York: Oxford University Press. Gingrich, J. (2011). Making Markets in the Welfare State: The Politics of Varying Market Reforms. Cambridge: Cambridge University Press.

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Gingrich, J. (2014). Visibility, Values, and Voters: The Informational Role of the Welfare State. The Journal of Politics, 76(02), 565–580. Gingrich, J. (2015). Varying Costs to Change? Institutional Change in the Public Sector. Governance, 28(1), 41–60. Gingrich, J. (2019). Swedish Schools: Still a Social Democratic Model? Working Paper. Oxford. Gingrich, J., & Watson, S. (2016). Privatising Participation? The Impact of Private Welfare Provision on Democratic Accountability. Politics and Society, 44(4), 573–613. Green, P. C., III, Baker, B. D., & Oluwole, J. O. (2013). Having It Both Ways: How Charter Schools Try to Obtain Funding of Public Schools and the Autonomy of Private Schools. Emory Law Journal, 63(2), 303–337. Hellwig, T. (2008). Globalisation, Policy Constraints, and Vote Choice. The Journal of Politics, 70(4), 1128–1141. Hirschman, A. O. (1970). Exit, Voice, and Loyalty: Responses to Decline in Firms, Organisations, and States. Cambridge, MA: Harvard University Press. Howard, C. (1999). The Hidden Welfare State: Tax Expenditures and Social Policy in the United States. Princeton: Princeton University Press. Iversen, T., & Soskice, D. (2001). An Asset Theory of Social Policy Preferences. American Political Science Review, 95(4), 875–893. Jæger, M. M. (2006). Welfare Regimes and Attitudes Towards Redistribution: The Regime Hypothesis Revisited. European Sociological Review, 22(2), 157–170. Kenworthy, L., & Pontusson, J. (2005). Rising Inequality and the Politics of Redistribution in Affluent Countries. Perspectives on Politics, 3(03), 449–471. Korpi, W., & Palme, J. (1998). The Paradox of Redistribution and Strategies of Equality: Welfare State Institutions, Inequality, and Poverty in the Western Countries. American Sociological Review, 63(5), 661–687. Kumlin, S., & Stadelmann-Steffen, I. (2014). Citizens, Policy Feedback, and European Welfare States. In S. Kumlin & I. Stadelmann-Steffen (Eds.), How Welfare States Shape the Democratic Public: Policy Feedback, Participation, Voting, and Attitudes (pp. 3–16). Cheltenham: Edward Elgar Publishing. Le Grand, J. (2003). Motivation, Agency, and Public Policy: Of Knights and Knaves, Pawns and Queens. Oxford: Oxford University Press. Lerman, A.  E., & McCabe, K.  T. (2017). Personal Experience and Public Opinion: A Theory and Test of Conditional Policy Feedback. The Journal of Politics, 79(2), 624–641.

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Lupu, N., & Pontusson, J. (2011). The Structure of Inequality and the Politics of Redistribution. American Political Science Review, 105(02), 316–336. Mettler, S. (2011). The Submerged State: How Invisible Government Policies Undermine American Democracy. Chicago: University of Chicago Press. Moe, T. M. (2011). Special Interest: Teachers Unions and America’s Public Schools. Washington, DC: Brookings Institution Press. Morel, N., Touzet, C., & Zemmour, M. (2016). Fiscal Welfare and Welfare State Reform: A Research Agenda. Working Paper. Paris: LIEPP (Laboratoire Interdisciplinaire d’Évaluation des Politiques Publiques). Morgan, K. J., & Campbell, A. L. (2011). The Delegated Welfare State: Medicare, Markets, and the Governance of Social Policy. Oxford: Oxford University Press. OECD. (2000a). Education at Glance. Technical Report. Paris: OECD. OECD. (2000b). Program for International Student Assessment. Technical Report. Paris: OECD. OECD. (2016). Health Data. Technical Report. Paris: OECD. OECD. (2019). Social Expenditure Data (SOCX). Paris: OECD. Orloff, A.  S. (1993). Gender and the Social Rights of Citizenship: The Comparative Analysis of Gender Relations and Welfare States. American Sociological Review, 58(3), 303–328. Pierson, P. (1993). When Effect Becomes Cause: Policy Feedback and Political Change. World Politics, 45(04), 595–628. Pollock, A.  M. (2004). NHS plc: The Privatisation of Our Health Care. London: Verso. Powell, G. B., & Whitten, G. D. (1993). A Cross-National Analysis of Economic Voting: Taking Account of the Political Context. American Journal of Political Science, 37(2), 391–414. Ranson, S. (1993). Markets or Democracy for Education. British Journal of Educational Studies, 41(4), 333–352. Rehm, P. (2016). Risk Inequality and Welfare States: Social Policy Preferences, Development, and Dynamics. New York: Cambridge University Press. Rehm, P., Hacker, J.  S., & Schlesinger, M. (2012). Insecure Alliances: Risk, Inequality, and Support for the Welfare State. American Political Science Review, 106(02), 386–406. Rueda, D., & Stegmueller, D. (2015). The Externalities of Inequality: Fear of Crime and Preferences for Redistribution in Western Europe. American Journal of Political Science, 60(2), 472–489. Sinfield, A. (2018). Fiscal Welfare. In B. Greve (Ed.), Routledge Handbook of the Welfare State (pp. 45–55). Londres: Routledge.

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3 The European Union and Multi-Level Contention over Welfare Marketization Amandine Crespy

3.1 Introduction Regional integration in Europe has strongly disrupted what Maurizio Ferrera called ‘the boundaries of welfare’ (2005). By opening national spaces to individuals enjoying new transnational rights attached to freedom of movement, European integration has disrupted the overlap between national citizenship, the channels of political participation linked to it, and institutionalized forms of social solidarity. This chapter sheds light on another kind of boundary displacement performed by European integration, which has attracted relatively little attention among scholars of welfare states and specialists of the EU, namely the marketization of welfare. Since the late 1980s, the provision of welfare services has been progressively removed from the realm of public service (and public law) and displaced to the realm of the market (and private law). In this new configuration, users are no longer seen as citizens A. Crespy (*) Free University of Brussels (ULB), Brussels, Belgium e-mail: [email protected] © The Author(s) 2021 C. Ledoux et al. (eds.), The Dynamics of Welfare Markets, Work and Welfare in Europe, https://doi.org/10.1007/978-3-030-56623-4_3

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entitled to equally enjoy quality services, but as customers who are able to afford different types of services with varying degrees of quality according to their purchasing power. As a result, welfare services have become ‘politically shaped, regulated and state supported markets providing social goods and services through the competitive activities of non-state actors’ (Ledoux et al., Chap. 1). At first sight, the European Union (EU) seems to have only a tenuous link with welfare services. Yet, EU integration has acted as a catalyst for the marketization of welfare services, notably by promoting the creation of competitive, but regulated, markets in areas in which they did not exist before the 1980s. To encompass the historical, institutional, and cultural diversity pertaining to welfare services1 in Europe (services publics in France, public utilities or universal healthcare in Britain, Daseinsvorsorge in Germany), a new term has been coined in EU law: services of general interest (SGI), which can be further defined as ‘economic’, ‘non-­ economic’ (a residual category) or ‘social’ (which can be regarded either as economic or non-economic). This legal re-categorization of welfare services has been part of the political struggles surrounding the marketization process. Contestation from within societies occurred mostly at the local and national level (see van Hooren, Chap. 14). Yet, as relevant policies have increasingly been enforced from the EU level, contentious citizens and organizations have sought to target decision makers in EU institutions. How the EU deals with contestation over the kind of political and social change brought about by welfare marketization has crucial implications for its legitimacy as a political order. This puzzle calls for going beyond established disciplinary boundaries between political economy, neo-institutional approaches to European integration, and the sociology of contentious politics. The broad account proposed here, based on ten years of empirical research on these matters, shows that EU policies have heavily contributed to the marketization of welfare with ambiguous and often contested outcomes. The actors opposing such policies have occasionally been able to shape decisions made at the EU level, with little long-term effects, however, as the EU remains essentially geared towards promoting market mechanisms, in particular cross-border liberalization. Theoretically, discursive institutionalism has provided effective tools to analyse how, in the

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peculiar multi-level institutional setting of the EU, agents were more or less able to politicize welfare issues in the public sphere through effective framing and their resonance with broader values and norms. To explain these complex processes, this chapter consists of four sections respectively addressing the following questions: How has the EU contributed to the emergence of welfare markets? Why are the EU’s policies contentious? How has said contention come to expression at the turn of the twenty-first century? And what has changed in light of the 2008 financial crisis and the ensuing recession in Europe?

3.2 E  uropean Integration as a Catalyst of Marketization In the era of globalization, since the late 1980s, the marketization of welfare has been a common trend in all advanced capitalist economies. Notwithstanding, the unique supranational system of policy making in the EU has accentuated the neo-liberal restructuring of European economies. This dynamic was especially present from the early 1990s to the early 2000s and was concomitant with the consolidation of the single market, more particularly the coming of age of the free circulation of services (one of the four freedoms enshrined in the 1957 Treaty of Rome). Since the EU is granted very few financial means,2 its role in the marketization of welfare has essentially relied on regulatory instruments, especially directives and regulations in the field of competition policy. However, the EU shapes policies concerning pensions and home-based services through even more indirect means, namely soft policy coordination.3 In order not to underestimate or overestimate the role of the EU, it is important to disentangle three related mechanisms which underpin marketization. Everywhere in Europe, the marketization of welfare services has occurred through liberalization, privatization, and deregulation. Liberalization means that markets are open to competition among several providers beyond national boundaries. In the post-war era of the twentieth century, public transport, telecommunications, energy and water

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distribution, education, healthcare, and so on were provided either directly by public authorities and administration or large national companies integrated in the state apparatus which enjoyed a monopolistic position. Liberalization has put an end to public monopolies and introduced competition, hence creating markets in areas where the state used to provide services to users. Liberalization has been partly accompanied by privatization, that is, the transfer of services provision from public to private companies. In the specialized literature, this is referred to as ownership structure. Today, most sectors nevertheless exhibit coexistence between public and private providers. This raises problems related to market regulation and the conditions under which several providers can offer different products on competitive markets, while still addressing the public interest at stake and offering quality services to differently endowed categories of users. The role of the State has shifted from that of provider to that of regulator or market organizer. The end of national public monopolies has meant deregulation in the sense that the regulations ruling provision by public companies (notably regarding prices) had to be adapted within the framework of competitive markets. The adoption of the Single European Act in 1986 is often seen as the relaunch of the European project which had (arguably) been stagnating throughout the 1970s. By setting as its objective the actual enforcement of the four freedoms (the free circulation of persons, goods, capital, and services) enshrined in the 1957 Treaty of Rome, the Treaty paved the way to Europe’s most tangible achievement, namely the creation of an internal (or single) market among the members of the then Economic Community. The liberalization of network industries (telecommunications, transport, gas and electricity, postal services) has been a cornerstone of this agenda and achieved through the adoption of a number of sectoral directives. The main purpose of liberalization was to end the monopolies, notably by separating the operation of the infrastructures and networks from production, distribution, and supply. The liberalization dynamics have been, to a large extent, self-reproductive. As reported in the Table 3.1 below, these directives included a revision clause, ensuring that, progressively, the entire set of activities in a given sector would be open to competition thus reaching out to households.

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Table 3.1   EU liberalization directives in welfare sectors Sector Air transport

First EU directive

First air transport package Regulation 3975/87/EEC, Regulation 3976/87/EEC, Directive 87/601/EEC Telecommunications First telecom package 88/301/EEC TV and broadcasting Directive Television without frontiers 89/552/EEC Railways First railway package Directive 91/440/EEC Electricity First energy package 96/92/EC Gas First energy package 98/30/EC Postal services First Postal Directive 97/67/EC Local urban Regulation 1370/2007 transport Tendering and attribution of contracts and concessions Healthcare Directive on Patients’ rights in cross-border healthcare 2011/24/EU Pensions Directive on Institutions for occupational retirement provision (IORP) 2003/41/ EC Directive on improving the portability of supplementary pension rights 2014/50/EU

Latest legislation adopted Third Air transport package Regulations 2407/92, 2408/92 and 2409/92 Telecom reform package 2006/136/EC, 2009/140/EC 2007/65/EC Directive Television without frontiers (amended) Fourth Railway Package (COM(2013)25) Third energy Package 2009/72/EC Third energy Package 2009/73/EC Third Postal Directive 2008/06/EC Regulation 1370/2007 Tendering and attribution of contracts and concessions

Directive on the activities and supervision of institutions for occupational retirement provision 2016/2341/EU

The intertwined dynamics of technological change and globalization have often been a main driver of this process, but the EU Commission has also been very proactive in promoting the building of a single market through liberalization. Besides its power to initiate legislation, the EU Commission enjoys an exclusive competence over competition policy. In this framework, it exercises a control of state aids for all services in the internal market,

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including SGI. State aids can be defined as any form of (mainly financial) support from public authorities to a private undertaking. While state aids to business are normally prohibited, the provision of welfare services can enjoy an exemption. In that case, the Commission monitors whether such support is proportional to the task of general interest carried out and does not involve any ‘overcompensation’ which would distort cross-­ border competition within the internal market. In other words, the states are allowed to compensate companies only for tasks pertaining to service to the public (such as longer opening hours, coverage of territory, or prices established on users’ income criteria) and which they would not carry out if they were to consider their commercial interest only. On the basis of the Altmark jurisprudence from 2003,4 the EU Commission has developed a complex set of rules to decide whether state aids can be granted in the name of welfare services or not.5 For public financial support to SGI to be compatible with EU competition policy, aids must a) be provided to companies which are formally entrusted with clearly defined responsibilities of public service by public authorities, b) be calculated in advance on the basis of clear criteria for the service provided, c) not exceed the cost of the service provided, and d) be calculated according to the standards of a well-run and efficient enterprise. When aids are deemed unlawful, they must be reimbursed. In 2005, two associations representing private hospitals in Brussels launched a procedure calling on the EU Commission to examine whether there was financial overcompensation on the part of the Belgian state for the public service obligation carried out by five public hospitals in the capital city. At the end of a long procedure, the Commission eventually concluded that the compensation was justified on the grounds that public hospitals were carrying the burden of dealing with a special category of underprivileged patients who could not always afford healthcare. In 2011 and 2012, the revised package of EU rules (dubbed the Almunia package) was adopted. It essentially provides for clearer and more flexible rules and, to diffuse critique of intrusion when welfare services have no cross-border significance, it sets a threshold under which public funding cannot be regarded as a state aid. The interpretation of rules with respect to state aids is therefore a crucial part of the EU’s activity as a regulator of welfare markets in which public and private providers compete with one another.

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The EU contributed to drive the marketization of pensions forward via two different routes. The first is the regulatory route. Two directives on occupational pensions were adopted in the framework of the Single Market regulation. After a failed attempt to create a Single Pension market for pension funds as early as 1991 (Hennessy 2008), a directive on institutions for occupational retirement provision was adopted in 2003 which liberalized the activities of pension funds. The intention was twofold: strengthen the European market, and steer the development of a second pillar funded by workers and employers in addition to the first, social security-based pillar (van Meerten 2019). The directive was revised in 2016 to improve information available to schemes’ members about their rights and encourage pension funds to invest long-term in the economy. Moreover, another EU directive deals with the portability of occupational pension benefits across borders. Put forward in 2005, the Commission proposal was only adopted in 2014 after ten years of controversial negotiations due to the fact that, in most countries, entitlements were not even portable from one sector to another. The final compromise includes a maximum vesting period of three years for rights to be portable. The second route for the EU to shape pensions is the soft coordination of national pension reforms. Through surveillance of their budgets, the EU exerts pressure on national governments to ensure the financial sustainability of their pension systems. In the aftermath of the latest recession, virtually all 28 EU member countries have adopted reforms affecting eligibility, calculation of benefits, indexation mechanisms, or general resources in order to contain costs. Pension reforms are monitored very closely not only by EU institutions in charge of social policy but also by the departments within the Council and the Commission in charge of economic and financial affairs. In its analyses and recommendations, EU institutions have consistently stressed the need for governments to a) raise the retirement age (both legal and effective); b) set up an automatic adjustment mechanism of retirement age to life expectancy, c) boost additional pillars next to social security (i.e. occupational pensions and private insurance); d) ‘avoid risk of reform reversals when faced with ageing median voters’ (European Commission 2016, p. 42). By promoting a three-pillar model, the EU therefore contributes to push forward the marketization of pensions.

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Similar to pensions, the EU only monitors and coordinates national policies in the field of long-term elderly care. Here, EU institutions are urging member states to adopt a proactive approach to tackle the increasing gap between supply and demand. While the emphasis also lies on the financial sustainability of health and long-term care systems, the European discourse is less prescriptive here and advocates policy solutions ranging from the ‘prevention of unhealthy lifestyles’ to ‘realising the full potential of technology to help older people remain at home’ or ‘enhancing support to informal carers’ (Council of the EU 2014). To sum up, marketization dynamics steered from the EU level have been multi-faceted and have occurred mainly through regulation and, to a lesser extent, soft coordination. While concerning mainly utilities and networks from the early 1990s until the early 2000s, the post-crisis era has seen the EU venture into new areas of welfare such as healthcare, pensions, or elderly care services.

3.3 T  he Contentious Outcomes of Welfare Marketization Across Europe Our purpose here is not to assess whether the rationale behind marketization is economically well grounded neither to demonstrate why marketization is ‘wrong’. Rather, it is assumed that decisions affecting the allocation of resources within society (in the form of public goods) are bound to affect various social groups in a way that reflects a certain balance of powers between them. The dominant discourse about marketization is well-known: its proponents depict it as a process of modernization which enhances efficiency and benefits consumers in the form of lower prices for better services. This section looks into evidence which contradicts this narrative in order to enlighten the reasons for political disagreements and the motives invoked by those who resist the ongoing trend towards welfare marketization. To that end, it looks at two types of dynamics. On the one hand, there are national factors shaping welfare markets within various welfare state models across Europe and contrasting political trajectories. These dynamics tend to produce differentiation

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across countries. On the other hand, beyond differentiation, common trends can be detected as far as the productive, allocative, and discursive outcomes of marketization are concerned (see Ledoux et al., Chap. 1). National governments certainly have a lot of leeway to mediate the effects of Europeanization. Hence, reform outcomes depend on local, regional, and national decisions, especially regarding the way in which various public authorities implement EU policies and regulations. The final picture is therefore necessarily mixed and differentiated across Europe, since member countries differ in their historical backgrounds and policy legacies, on the one hand, and reform courses and political trajectories, on the other hand. Following Bauby (2011), one can distinguish four ‘worlds’ of welfare services in today’s Europe, namely unitary and centralized States like France and the United Kingdom, where large national public monopolies were established after the Second World War and defined centrally (and a number of countries such as Spain, Portugal, or Belgium coming close to this model); continental federal states, such as Germany and Austria, where the provision of welfare services is traditionally largely decentralized, supervised by the local authorities and with fragmented markets; Scandinavian countries, where strong local autonomy goes hand-in-hand with a demanding conception of welfare services funded by high levels of taxes; and Central and Eastern European countries, where the model of universal and free-of-charge services during the Communist era was rejected and various countries now exhibit varying degrees of marketization and market regulation. Most importantly, different countries have also followed different trajectories due to changing political cycles over the past two decades. The United Kingdom, for example, is the only country where there has been a strong shift from entirely public structures to entirely private structures. France, on the other hand, has tended to resist liberalization politically and delay market opening in order to protect its large national companies as well as to promote their strategic and commercial interests in a now transnational market. The policy changes affecting labour markets have also had a strong impact on employment levels and working conditions. Between the mid-1990s and mid-2000s, the British government conducted a re-regulation in some respects, whereas in Germany working conditions and wages in the services sector have rapidly deteriorated as a

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result of the Hartz reforms conducted under Gerhard Schröder (1998–2005). In Denmark and Sweden, higher levels of competition and privatization can now be observed in many sectors as these processes were introduced at a fairly early stage compared to other EU countries. However, as pointed out by Thörnqvist (2008), since these services used to function fairly well prior to liberalization, it is difficult to assess the added value of the transformation. In this respect, it is important to stress that in Scandinavia the negative effects of liberalization policies observed elsewhere have been attenuated by continuing high levels of regulation and funding. All of this therefore points to the key role of efficient regulation at all levels of government in order to manage the impact of economic change on workers and users of welfare services. In spite of ample national and sectoral variation, a modest body of research and studies attempted to detect common trends by assessing the effects of EU policies on welfare services in a more holistic way. From 1997 to 2007, the EU Commission conducted an evaluation of the performance of network industries providing SGI. Independent research has shown that, in the face of complex or inconclusive results, the assessment by the Commission was often over-optimistic or methodologically biased (Clifton and Diaz-Fuentes 2010). The negative corollary effects of liberalization policies have been pointed out in a modest number of studies conducted by scholars either for the EU Commission itself (CIRIEC 2004; Griffith and Harrison 2004) or promoted by trade unions (Keune et  al. 2008) and, more recently, in the framework of pan-European research projects (Frangakis et  al. 2008; Flecker and Hermann 2012). Common trends can be observed with regard to competition, productivity, employment, wages, working conditions, service quality, and consumer satisfaction. A first, main observation is that liberalization policies did not necessarily lead to the establishment of significantly more competitive market structures, that is, where services are offered by a large number of different providers. In sectors and countries where there was a monopoly, the market may have been opened to competitors, but only to a limited extent, as in the postal sector, rail transport, or electricity supply in Poland and the United Kingdom. In contrast, in countries where the markets had traditionally been very fragmented, that is, mainly federal countries,

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or in sectors such as local public transport, there has been a trend towards market concentration. All in all, there is a convergent trend towards concentration. Large—multinational—firms are taking over local and smaller providers. While in neo-liberal thought, competition among providers is the main mechanism through which consumers’ demands for more choice and lower prices can be met, convergence towards (private) oligopolies is not very likely to reach that objective. Prices tend to drop in the initial years following market opening, but they can increase dramatically in a second phase. Moreover, price decreases tend to benefit large consumers in industry rather than households. Gains in efficiency and productivity are another main argument put forward by the proponents of welfare services marketization. However, a common result of all studies is that productivity gains are, to a large extent, due to cuts in jobs and wages following marketization. These effects cannot be disentangled from real efficiency gains due to, for example, better production processes or technology. Adjustment to competition almost systematically brings about redundancies for the former national monopolist. Sometimes, as in the postal or electricity sector in Germany and Sweden, firms have considerably reduced employment at home but expanded abroad. This is also linked to a sensitive deterioration of employment and pay conditions. In particular, new private competitors offer much less attractive work contracts than public companies. The pay gap between public and private companies can range from 16 to 50 percent as in the postal sector in Germany (Keune et al. 2008, p. 27-30). New organization and management methods have considerably increased pressure on workers. In France, a wave of suicides among employees of the former public telecommunications operator France Telecom in 2010 raised awareness among the public and the political class about the extreme pressure for increased productivity put on the labour force under post-privatization managerial conditions. As far as benefits for consumers are concerned, results are also mitigated, with much variation across countries and sectors. In some sectors, such as transport or postal services, some quality criteria related to time are more important, while in other sectors, such as energy or hospitals, costs have become a concern for users. Beyond such variation, however, a survey conducted across six European countries6 points out two very

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interesting conclusions (Van Gyes et al. 2009). Firstly, a small majority of users seem to be globally satisfied with SGI provision. While comparing countries where specific sectors are either the most or least liberalized, the survey nevertheless shows that similar or inversely contrasting levels of satisfaction can be expressed. In other words, users can be equally satisfied or dissatisfied with services provided by the public or the private sector in highly competitive or uncompetitive settings. Secondly, the level of satisfaction and users’ general assessment displays a strong class dimension. Users with lower income and lower education level tend to be less satisfied with the liberalized provision of SGI than citizens with a higher social status. While the latter tend to be more demanding towards the service quality, the former are dissatisfied with high prices. Correspondingly, liberalization as a policy programme enjoys stronger support among better-off households. This means that the paradigm based on consumer choice is sociologically biased to the detriment of modest households who find it hard to gather the relevant information to make the best choice. Shifting the focus from the national to the supranational level of governance in terms of policy making therefore begs the question whether political contention over welfare markets has also undergone a process of Europeanization. The following section looks into the pre-2008 period which has witnessed the slow coming of age of transnational contention over welfare markets.

3.4 T  he Emergence of Multi-Level Contention over Welfare Marketization The contestation of welfare marketization emerged in the 1990s. It followed a twofold dynamic of local and national mobilization, on the one hand, and of transnational, European mobilization, on the other. This dynamic was supported by the coming of age of the global justice movement and pan-European unionism (Crespy 2016, chap. 3). In the 1990s, contention emerged most of the time when liberalization had already been decided at the EU level, long beforehand, and then

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later translated into restructuring plans and/or privatization on the ground. While industrial action and contestation related to pay or restructuring, for instance, have been constant phenomena, contestation usually did not systematically or explicitly target EU policies as their cause. There are hundreds of examples of times when unions at the regional or national level reacted to the indirect and often delayed consequences of ongoing marketization policies in sectors targeted by the Single Market programme (transport, energy, postal services, etc.). However, occasional protest and industrial action aiming at preserving levels of employment and favourable pay and working conditions alternated with resignation. In some countries or sectors, consensual politics paved the way for strategic partnerships with management to shape companies’ competitiveness in the European market. In any event, unions had to acknowledge that, in the medium and long run, liberalization and privatization were inevitable; not only because it allowed states to raise revenue, but also because market integration constituted a new inescapable environment in the context of European integration. This occasionally paved the way for mobilization beyond national borders in order to address policy issues arising at the EU level of governance. The transnational coordination of contestation emerged in the 1990s mainly—albeit not exclusively—at the sectoral level. The liberalization of rail transport offers a good example of the dynamics of contention as well as the significant obstacles it meets at both the ideological and organizational level. According to Hilal (2007), three distinct stages of mobilization in the railway sector can be identified. When the first railway package was adopted in 1991, a gap among trade unions appeared which— roughly speaking—overlapped with North-South differences in terms of conception of the State, public services, and industrial relations. Whereas German and Nordic trade unions engaged with the reform processes in order to negotiate the best conditions for workers, unions in France and Southern Europe attempted to resist marketization through adversarial strategies and conflict. In countries where national governments had already undertaken liberalization and privatization, such as the United Kingdom or the Netherlands, the new EU legislation was not perceived as a threat. During a second phase, from 1996 to 2004, transnational coordination started to be seen as a response to the negative impact of

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liberalization policies, which had become more visible in many EU countries. The European Transport Federation was pivotal in developing not only transnational mobilization networks but also direct links with representatives of EU institutions. From the mid-1990s onwards, the ETF (European Transport Federation) pioneered European forms of mobilization, such as marches to Brussels, Eurostrikes, and European demonstrations (Idem). In other sectors, contention has remained confined to the local or national level. Healthcare, for instance, has been a sector where the contestation vis-à-vis privatization has intensified over the past few years. The exponential rise in the demand for affordable healthcare within European societies combined with the erosion of state revenue has made the funding of healthcare a major issue for all governments. EU integration has contributed to tightening this financial straightjacket through various routes—including the convergence towards EMU (Economic and Monetary Union), and more recently, the response to the 2008 financial and debt crisis. As a result, many governments have undertaken the restructuring and/or privatization of healthcare services and hospitals, with negative consequences in terms of work intensification and service quality. Such policies have been vigorously contested by coalitions of local or national actors, for instance by the British network ‘Keep our NHS public’, which comprises various NGOs and groups, including the United Kingdom’s largest union, Unison, or by diverse platforms in Poland and Hungary, where several radical government initiatives to privatize healthcare services and insurance over the course of the 2000s have met strong resistance (Lóránt 2008). The call for local or national referendums has become a new tool used by workers’ coalitions, professionals’ unions, citizens’ groups, and NGOs for preventing or reversing privatization in various sectors (energy, water, transport, and telecommunications) and countries (Germany, Slovenia, or Italy). The contentious debate over the Services Directive (2004–2006) constituted a climax, as it brought about large-scale pan-European mobilization. A loose and broad coalition formed to contest the very neo-­liberal flavour of the directive put forward under the auspices of Commissioner Bolkestein and aiming at liberalizing all services activities (including SGI) in the EU (Crespy 2012). The actors forming this coalition—that

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is, NGOs and associations of the global justice movement, political parties of the radical and social-democratic left, and unions—successfully used two features of the institutional setting characterizing this contentious episode: the multi-level nature of the EU polity, on the one hand, and the key role of the European Parliament (EP) under the co-decision procedure (now the ordinary legislative procedure of the EU), on the other. Transnational networks within the global justice (or alter-globalist) movement—notably Attac, but also unions politically close and practically involved in the movement—played a pioneering role in politicizing the issue at an early stage, notably through events like the European Social Forum and their informal ties across national borders, thus launching an ‘anti-Bolkestein campaign’ in a context which saw France hold a referendum on the European Constitutional Treaty. The domestic route was used in a concomitant way. In countries where the debate was most vivid (Belgium, Germany, and France) socialist and social-democratic parties, including those in government (as in Belgium and Germany), took a critical stance towards the Commission’s proposal, thus following the early mobilization of parties of the radical left. This was accompanied by resolutions passed in national parliaments reshaping governments’ positions in the Council. Finally, the supranational route, consisting of using the most institutionalized channels of the EU polity, in particular the EP and the influence of the European Trade Union Confederation (ETUC), was also activated. Under the ordinary legislative procedure of the EU, the role of the EP as a co-legislator is a key aspect. Through the simultaneous activation of the multiple channels of Europeanization, an anti-Bolkestein coalition could form which, albeit loosely, grew over time. This coalition succeeded in altering the minority/majority positions on the Commission’s original proposal, which contributed to attenuating the effects of negative integration enforced through the Services Directive on welfare services. Many MEPs (Member(s) of the European Parliament) within left-wing political groups (the GUE/NGL, Greens/ALE, and PES at the time) were actively involved in the politicization on the ground in their home countries. In addition, the two rapporteurs (the Belgian socialist Anne van Lancker and the German social democrat Evelyne Gebhardt) rapidly embraced the concerns of the anti-Bolkestein coalition. Thus, the EP became both

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the key ally of the coalition and the institutional arena in which critical claims could resonate and be channelled. The opponents of the ‘Bolkestein directive’ successfully deepened polarization through efficient discourse, articulating powerful frames and counter-frames. They claimed the necessity to defend the possible existence of a ‘social Europe’ against the rampant ‘neo-liberal Europe’ (Crespy 2010). Such framing encompassed more specific elements of discourse, such as wage and social dumping or attacks on public services. By invoking ‘social Europe’, they used a well-established master frame which had been forged in the public debate surrounding EU integration since the 1960s. After two years of heated debate and pressure on European decision makers, and for the first time in the history of EU politics, the EP reached a political compromise in its first reading and substantially redrafted the Commission’s much criticized proposal. While liberalization still went ahead, its more critical elements were dampened. Healthcare was exempted from the scope of the directive’s application and some safeguards were put in place to prevent excessive liberalization. In a nutshell, the decade from the mid-1990s to the mid-2000s witnessed the emergence of multi-level protest against policies encouraging the marketization and re-commodification of welfare. This implied the Europeanization of unions’ collective action, but also broader alliances with NGOs and citizens’ groups at the local or national level. More occasionally, broad, transnational coalitions formed across several EU countries and were able to exert significant pressure on decision makers in Brussels. In this regard, the ability to target the EU as the source of marketization and to frame an effective discourse appealing to broad values was key. This multi-level contentious dynamic was nevertheless mostly absent from the reaction to austerity policies, which barely targeted the EU.

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3.5 W  elfare Since the Great Recession: More Marketization, Less Europe-Wide Contention In the vast majority of European countries, people have witnessed a significant deterioration of welfare over the past ten years or so. In the face of increased pressure from markets, international financial institutions, and the EU to tackle the brutal increase of public debt, European countries have mainly responded in two ways: cuts in public spending leading to retrenchment and cuts in investments, on the one hand, and further marketization of funding and/or provision in an increased number of policy sectors, on the other (Crespy 2016, chap. 6). Of course, countries receiving financial assistance from the so-called Troika (the European Central Bank, the European Commission, and the International Monetary Fund) have experienced the most radical debasing of their social model, as drastic cuts in public spending were a condition for their financial rescue. In Greece and Portugal, this has notably translated into large-scale privatization plans, which included the sale of companies in the energy, transport, and postal sectors, as well as of public infrastructures such as ports, railways, or motorways. In Italy, 120,000 school teachers have been laid off since 2008, and public funding of universities has dramatically decreased. Vulnerable economies in Central and Eastern Europe have taken drastic measures. In Bulgaria, for example, the budget for hospitals was cut by 24 percent in 2009, with many public hospitals being closed or privatized. In addition, 380,000 Bulgarian citizens lost their right to free healthcare as a result of changes in the Public Health Act adopted in January 2010 (PSIRU 2011). In Ireland, too, the austerity plan adopted in response to the bank crisis brought about a degradation of healthcare services and the adoption of a plan for privatization of the sector by 2016 (Crespy 2016). But the debasing of welfare services has not only affected the most vulnerable economies in Europe. In the United Kingdom, a country which is not directly involved in the salvage of the euro, the government has implemented a major austerity plan since the conservatives came to power in 2010. The viability of the National Health Service has been

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hotly debated and is cause of much concern, as creeping privatization has been ongoing over the past years. The funding of schools is equally problematic as needs increase. Even Germany, the economic hegemon of the EU, adopted the ‘package for the future’ in June 2010, the largest austerity plan in the post-war period. Similar concerns about the sustainability of public funding of healthcare and education under austerity have been debated. France, under socialist President Hollande, first resisted austerity. In 2014, the government nevertheless adopted a plan foreseeing € 50 billion in cuts in 2015–2017, including 20 billion in the funding for healthcare and other social expenses. Besides the consequences of ‘fiscal consolidation’, some problematic aspects in the liberalized network industries have been more salient as the crisis has hit societies. The price of energy, in particular, has significantly increased in proportion to stagnating or decreasing wages. Similarly, the affordability of housing has become problematic in many European countries, thus putting pressure on social housing policies (Crespy 2016). The financial crisis that began in earnest in Europe around 2008 led to the implementation of an austerity agenda of cuts across the EU. The so-­ called Indignados and Occupy protests against this austerity agenda and the flaws of the systems that allowed the crisis to occur swept across Europe in 2011 before spreading to the United States. The protests were characterized, amongst other things, by the occupation of public spaces in several EU Member states. The strategy of these movements focused on redefining horizontal democratic practices through horizontal networks in isolation from established political actors, including unions, whom they saw as partly responsible for the general failure of the system (e.g. Kaldor et al. 2012). The movement Nuit Debout which unfolded in 2016 in Paris is a further illustration of how contestation over social policy making took a new, creative form which had little connection with— and also little grip over—decision-making arenas. Unlike the global justice movement, which has waned since the mid-­2000s, the post-crisis movements have not engaged with the EU and its responsibility for the type of policies implemented at the national level. Instead, most activists seem to have moved towards a more radical critique of the EU, which is seen as a pro-market force under the influence of financial markets and lobbies. In the face of austerity policies

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implemented across the board, the claim that ‘another Europe is possible’ was abandoned, and the EU simply rejected rather than considered a potential arena for constructing alternatives. This shift can be seen as an indication of a perceived closure of political opportunities at the EU level, as the prevailing ‘emergency politics’ (White 2015) initiated an intergovernmental turn away from normally established deliberative procedures (della Porta and Parks 2018). When the debasing of the European banking sector spiralled into a possible collapse of the Eurozone, immediate responses were dealt with in extraordinary meetings of the European Council (heads of states and governments), Franco-German summits, or summits of the Eurogroup, the conclave gathering the Finance Ministers from Euro area member countries, which has no official legal existence but tremendous effective decision-making power. The financial loans granted to excessively indebted countries (Greece, Ireland, Portugal, Italy, Cyprus) were agreed to outside of the EU legal framework in the Memoranda of Understanding negotiated by the Troika with national governments. Drastic cuts in public welfare services and the liberalization and privatization across the board were a recurrent condition attached to the granting of financial help. But the opacity of said negotiations made it very difficult for citizens and organized civil society to know who should be held accountable for the harsh policies which led to a rapid deterioration of welfare and even, as far as Greece is concerned, a humanitarian crisis. Hence, in contrast to the ordinary legislative procedure, the European Parliament had little to no say in these processes. The opportunities provided by parliamentary politics, which were used in many contentious episodes, were therefore no longer available to groups that wanted to contest policy decisions affecting welfare (Crespy and Parks 2017). This institutional closure of opportunities has brought about a withdrawal into the national political realm, contributing to a lack of transnational dimension to anti-austerity protest. In the post-crisis era, European countries have thus moved from punctual austerity packages or structural reforms attached to financial loans to a regime of permanent austerity. As a response to the destabilization of the Eurozone, rules concerning fiscal discipline have been made more stringent. The Stability and Growth Pact limiting deficit and debt has been turned into binding regulations and an elaborate procedure for the

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surveillance of national budgets by the European Commission and all Member States multilaterally (the so-called European Semester) has been set up from 2011 onwards. The review of national budgets triggers occasional confrontations between the European Commission and more or less recalcitrant governments. Within the fiscal space available, governments are thus faced with financial and regulatory dilemmas. Against this background, the further marketization of welfare is the main strategy available for sustaining society’s needs. The sector of elderly care, whether in nursery homes or as home-based services, offers a telling illustration of a rapidly emerging market in the era of permanent austerity in France. After a phase of investment for the creation of new places in Medicalized nursing homes, known as EHPAD (Établissements d’hébergement pour personnes âgées dépendantes), the government put a brake to expenditure, as a major reform aiming at cost-­ containment was adopted in 2010. While the government sought to promote less costly home-based care instead of building new homes, the new policy could not tackle the increasing needs among elderly people. This led to the slow yet continuous rise in the share of private providers with a commercial purpose in running EHPADs, up to approximately 25 percent today. Chronic labour shortages and poor working conditions have triggered a vivid ongoing workers’ mobilization starting in 2018 and 2019. They have deplored the shortage of 40,000 jobs in the sector, the deteriorating quality of services, and even serious failure to ensure human dignity in some homes. Meanwhile, the rise of business opportunities is being closely watched by the private sector,7 as further marketization is seen as the only available and desirable option for tackling these issues. By providing only the fiscal rules of the game for national governments’ policy making, the EU has an indirect impact on welfare markets and remains insulated from protest.

3.6 Conclusion In the absence of strong competences for social policy, including the lack of significant financial resources, the EU has never developed specific policies targeting welfare services. Rather, from the early 1990s onwards,

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it has contributed to create welfare markets, as services liberalization has become a cornerstone of the completion of the Single Market. Through the adoption of liberalization directives and the enforcement of competition policy, the EU has been a driving force behind the broader marketization of welfare. In particular, it has played a key role in redefining the broad regulatory framework applying to welfare markets. The bulk of competences has nevertheless remained in the hands of national governments, thus bringing about contrasting sectoral, institutional, and political dynamics across the continent. Marketization policies in the various sectors of welfare services have triggered social resistance at all levels of governance, with occasional transnational coordination targeting the EU.  The 2008-2010 financial and debt crisis has affected most welfare services sectors, notably through the implementation of austerity packages. Yet, little pan-European contestation has emerged. Protest movements have developed mainly at the local and national level with few political and institutional means to channel their grievances to the EU arena, where remote and opaque intergovernmental politics has prevailed. The further marketization and privatization of welfare services has been a main consequence of the financial and debt crisis in Europe. The role of the EU can be seen either as direct, in countries where bailouts were attached to harsh social conditionality, or indirect, insofar as fiscal space for addressing market failure in the various welfare sectors has been reduced as a result of tightened fiscal discipline enforced from Brussels. Against this background, marketization prevails as the main available option for ensuring that society’s needs are met. This raises two main challenges for the present and the future. The first is to ensure a sufficient capacity from governments to adequately regulate the existing and emerging markets, making sure that the quality, accessibility, and affordability of services are guaranteed for all groups. The second challenge relates to democratic decision making over services which address people’s basic needs and, even in the case of competitive markets, involve taxpayers’ money to a substantial extent. In this regard, opaque multi-level politics, especially in times of ‘emergency politics’ (White 2015), has made it increasingly difficult for citizens to identify the responsible authority and organize protest accordingly. Similar to other policy

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areas, welfare markets have become part of an economic area where, some claim, ‘there is no alternative’ to rampant marketization. This is a problem insofar as welfare markets play a key role in containing or accelerating the rise of social inequalities, a problem faced by virtually all European countries.

Notes 1. In tune with the definition referred to above, the notion of welfare services refers here to the provision of utilities (energy, water, and telecommunications), public transport, health and long-term care, social care, home-­ based services, and so on. Pensions, while constituting a transfer rather than a good or service, can be also regarded as an insurance or financial product. 2. The budget of the EU represents only approximately 1 percent of the European GDP. 3. Except for the coordination of social security for migrant workers which is regulated through hard law since the early days of EU integration. 4. Case C-280/00 Altmark Trans GmbH, 24 July 2003. 5. These rules are known as the ‘Monti-Kroes package’ (from the name of the former Commissioners for competition Mario Monti and Nelly Kroes) from 2005. 6. Austria, Belgium, Germany, Poland, Sweden, and the United Kingdom. 7. ‘Changing Beds: French Nursing Homes and Opportunities for the Private Sector’, Executive Insights, XVI, 41, L.E.K. Consulting, available at: www.lek.com, accessed 30 September 2019.

References Bauby, P. (2011). L’européanisation des services publics. Paris: Presses de Science Po. CIRIEC. (2004). Contribution of Services of General Interest to Economic and Social Cohesion. http://www.psiru.org. Accessed 20 Jun 2015. Clifton, J., & Diaz-Fuentes, D. (2010). Evaluating EU Policies on Public Services: A Citizen’s Perspective. Annals of Public and Cooperative Economics, 81(2), 281–311.

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Council of the European Union. (2014). The Social Dimension of the EU/EMU Adequate Social Protection for Long-Term Care Needs in an Ageing Society  – Endorsement of Key Messages. Social Protection Committee 10406/14. Crespy, A. (2010). Contre « Bolkestein »: Le Parlement européen entre idéologie et stratégie institutionnelle. Revue française de science politique, 60(5), 975–996. Crespy, A. (2012). Qui a peur de Bolkestein? Conflit, résistances et démocratie dans l’Union européenne. Paris: Economica. Crespy, A. (2016). Welfare Markets in Europe. The Democratic Challenge of European Integration. Basingstoke: Palgrave. Crespy, A., & Parks, L. (2017). The Connection Between Parliamentary and Extraparliamentary Opposition in the EU.  From ACTA to the Financial Crisis. Journal of European Integration, 39(4), 453–467. della Porta, D., & Parks, L. (2018). Social Movements, the European Crisis, and EU Political Opportunities. Comparative European Politics, 16(1), 85–102. European Commission. (2016). Pension Reforms in the EU since the Early 2000s: Achievements and Challenges Ahead. European Economy Discussion Papers, 042. https://ec.europa.eu/info/sites/info/files/dp042_en.pdf. Accessed 30 Sept 2019. Ferrera, M. (2005). The Boundaries of Welfare. European Integration and the New Spatial Politics of Social Protection. Oxford/New York: Oxford University Press. Flecker, J., & Hermann, C. (Eds.). (2012). Privatization of Public Services. Impacts for Employment, Working Conditions, and Service Quality in Europe. London: Routledge. Frangakis, M., Hermann, C., Huffschmidd, J., & Lóránt, K. (Eds.). (2008). Privatisation against the European Social Model. A Critique of European Policies and Proposals for Alternatives. Basingstoke: Palgrave Macmillan. Griffith, R., & Harrison, R. (2004). The Link Between Product Market Reform and Macro-Economic Performance, European Commission, DG for economic and financial affairs. http://ec.europa.eu/. Accessed 7 Jan 2016. Hennessy, A. (2008). Economic Interests and the Construction of a European Single Pension Market. British Journal of Politics and International Relations, 10(1), 105–128. Hilal, N. (2007). L’eurosyndicalisme par l’action. Cheminots et routiers en Europe. Paris: L’Harmattan. Kaldor, M. Selchow, S., Deel, S., & Murray-Leach, T. (2012). The ‘Bubbling Up’ of Subterranean Politics in Europe. Civil Society and Human Security Research Unit, London School of Economics and Political Science, London. http:// eprints.lse.ac.uk/44873. Accessed 30 Sept 2019.

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Keune, M., Leschke, J., & Watt, A. (2008). Privatisation and Liberalisation of Public Services in Europe. Brussels: ETUI. Lóránt, K. (2008). Privatisation in Central and Eastern European Countries. In M. Frangakis, C. Hermann, J. Huffschmidd, & K. Lóránt (Eds.), Privatisation against the European Social Model. A Critique of European Policies and Proposals for Alternatives (pp. 30–48). Basingstoke: Palgrave Macmillan. PSIRU. (2011). Cuts Watch. Bulgaria. Available at: https://www.psiru.org/ node/16083.html. Accessed 30 Mar 2020. Thörnqvist, C. (2008). Marketisation in Swedish Electricity and Postal Services. In M. Keune, J. Leschke, & A. Watt (Eds.), Privatisation and Liberalisation of Public Services in Europe: An Analysis of Economic and Labour Market Impacts (pp. 67–89). Brussels: ETUI. Van Gyes, G., Vael, T., & Vandekerckhove, S. (2009). Liberalising Services of General Economic Interest: The Citizen-User Perspective in Six EU Countries. Policy Paper Privatisation of Public Services and the Impact on Quality, Employment and Productivity (PIQUE) n°5. Available at: https://cordis. europa.eu/docs/results/28/28478/122489371-­6_en.pdf. Accessed 21 Apr 2015. van Meerten, H. (2019). EU Pension Law. Amsterdam: Amsterdam University Press. White, J. (2015). Emergency Europe. Political Studies, 63(2), 300–318.

Part II (Re)constructing Welfare Markets

4 Welfare Markets and Home-Based Domestic/Care Services: Market Dynamics and Mechanisms in Two Different Institutional Contexts—Spain and Sweden Zenia Hellgren and Barbara Hobson

4.1 Introduction Spain and Sweden, countries with very different institutional contexts and historical trajectories in welfare markets, are interesting cases for exploring the dynamics of markets in home-based services. These two countries have dramatically different state policies with respect to care, migration and employment (Hobson et al. 2018). They differ along many dimensions of welfare markets, including the drivers and trajectories shaping demand (care and time deficits), the governance and regulation

Z. Hellgren Pompeu Fabra University, Barcelona, Spain e-mail: [email protected] B. Hobson (*) Stockholm University, Stockholm, Sweden e-mail: [email protected] © The Author(s) 2021 C. Ledoux et al. (eds.), The Dynamics of Welfare Markets, Work and Welfare in Europe, https://doi.org/10.1007/978-3-030-56623-4_4

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of private markets, and the tolerance/intolerance of informal work. In this chapter, we explore how differences in institutional contexts are reflected in the dynamics of welfare markets, in the choice of policy instruments to regulate them and how they work in practice, including access to these services (affordability) and the conditions for workers in the sector, mainly migrants. Whereas much of the literature on welfare markets and household services assumes that inequality and precariousness are generic to the sector (Williams 2012; Kilkey et  al. 2010), we argue that the dynamics of welfare markets are context-specific in processes and outcomes: how these markets work in practice reflects institutional structures, state and non-state actors and political discourses. We maintain that to understand the emergence and evolving dynamics in welfare markets and home-based domestic/care services necessitates a multi-dimensional approach with attention to multiple actors with different interests and situated agency, including policymakers, users, workers, employers and unions. Our comparative analysis goes beyond tracing the effects of policy on regulating markets, by addressing how these markets work in everyday practice. We also address market contingencies, most notably the 2008 global financial crisis which had a lasting effect in Spain. We rely on multiple data sources, including data derived from national surveys, 90 interviews with migrants and 30 interviews with stakeholders (representatives of unions, NGOs and employer associations in the domestic/care service sector). The first part of this chapter situates our two cases within the broader framework of market-based domestic/care services and welfare markets. It introduces the idea of a ‘hidden welfare market’ and explains how institutional configurations in Spain and Sweden are reflected in policy choices, regulatory instruments and governance of private markets in services. In the next section, we discuss how these markets work in practice across several dimensions and multiple actors. Finally, in the conclusion, we highlight the broader questions of what these markets do and do not do, and their implications for how we assess a well-functioning welfare market.

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4.2 Institutional Configurations and Welfare Markets 4.2.1 T  he Contours of Welfare Markets in Home-Based Services Approaching welfare markets in domestic/care services requires a wider lens than the conventional framing of them as replacements for existing state services (Taylor-Gooby 1998). Both care needs and time deficits arising from women’s increased labour force participation spawned policies that activated demand for domestic/care services. Particularly in Mediterranean familialistic welfare states, with minimal state-supported services for elderly care, it is a misnomer to characterize welfare markets in terms of a shift from public services to marketized alternatives (León 2010; Simonazzi 2009). The definition of welfare markets in this volume, as ‘politically shaped, regulated and state supported markets, which provide social goods and services through competitive non-state actors’ (Ledoux et al., Chap. 1), offers a framework that is inclusive and provides scope for the diversities in welfare markets (Estévez-Abe and Hobson 2015), while revealing the complex ways in which the market interpenetrates non-market spheres. These include different types of support for household-based services, both indirect and direct, and how they are implemented, which can result in intended and unintended consequences, including: (1) the stratifications within the market; (2) the deskilling of labour seen in the blurring of boundaries between care and cleaning (Lutz 2008; Carbonnier and Morel 2015; Shire 2015); and (3), the reliance on low-waged migrant labour to keep services affordable (Hobson et al. 2018). Spain and Sweden have different drivers and trajectories in welfare markets. In Sweden, private domestic/care services constituted a marginal sector, mainly informal and a highly contested political issue. In 2007, a policy reform with generous tax subsidies for domestic/care services, known as the RUT, opened the gates for a legal market once illegal and stigmatized in the Swedish model. RUT does not really have a literal meaning but refers to the specific policy for tax reductions for domestic

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services including cleaning, gardening, childminding, and extra support for elderly. Spain has a longer history of private markets for home-based services, going back several decades, in which families from the higher social strata employed live-in domestic/care workers from poorer regions of Spain. The situation changed in the 1990s when increasing numbers of married women were entering the labour force, while there was a dearth of internal migrants. Care and time deficits resulted from an acute lack of public financed care for the elderly, but also the fact that, in a cultural context in which women tend to work full time, men did not increase their share of unpaid work (León 2010; Petersen 2007). The ‘solution’ for these care and time deficits appeared in Spain’s comparably ‘generous’ migration policy (Izquierdo 2005). The reliance on private domestic/care services, often provided by migrant workers, was a convenient ‘solution’ for the Spanish state, reducing pressure on politicians to expand public services for the elderly or for children (Peterson 2007).1 Rather than an explicit policy towards welfare markets in domestic/ care services initiated by the state, the supply of female migrants, most of whom arrived undocumented in search of jobs to support family members left back home, paved the way for an implicit contract between the state and its citizens. This contract provided middle-income families with affordable services via a laissez-faire ‘look the other way-policy’ towards undocumented migrant labour (Izquierdo 2005). Tolerance for informality in household service markets can be seen as a hidden welfare market. It is a ‘benefit’ for families, who as employers using these services can avoid social costs for labour, while the state loses tax revenues from those working in the sector.

4.2.2 Expansion in Welfare Markets In Spain, the conjunction in demand for affordable private domestic/care services and supply of low-waged migrant workers produced a dramatic expansion in the sector. In 2005, the proportion of migrant workers in the domestic/care services surpassed that of native workers (Hellgren and Serrano 2019) (Fig.  4.1). By 2010, 20 percent of non-EU15 female migrants in Spain were working in the sector (Ibáñez and León 2014).

4  Welfare Markets and Home-Based Domestic/Care Services…  Spain

Sweden

600000

600000

500000

500000

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400000

300000

300000

200000

200000

100000

100000

0 2005 2006 2007 2008 2009 2010 2011 Immigrant

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Spanish*

0 2005 2006 2007 2008 2009 2010 2011 Immigrants

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Fig. 4.1  Proportion of natives and immigrant women working in the care/domestic sector in Spain and Sweden. (Source: Spanish Labor Force Survey and Statistics Sweden (2016)). Included are those working in the private market as well as those employed in the public sector or outsourced by municipalities, though all occupy the more low-skilled jobs. (Note: *Spanish includes women with dual nationality (Spanish and other), and Swedish includes all women born in Sweden)

Charting the dynamics of the domestic/care services market in Spain is defined by pre- and post-2008, in which the Great Recession marked a turning point in the Spanish economy that has remained, reflected in general loss of acquisitive power of families and high overall unemployment. Statistical data from the Spanish Labour Force Survey (n.d.) show that there has been a contraction of the sector with slightly over 500,000 persons employed in 2015, compared to nearly 700,000 persons in 2008 (Hellgren and Serrano 2019). According to survey data, the proportion of Spanish households purchasing domestic/care services declined from 14.4 percent in 2009 (INE 2012) to 11.4 percent in 2014 (CIS 2014). In Sweden, direct intervention with a generous tax subsidy incentivized a welfare market and activated a latent demand for domestic/care services. The size of the sector has grown exponentially in just one decade after implementation of the subsidy, from 4 percent of users in 2010–11 to over 8 percent in 2018 (derived from Statistics Sweden). However, with the exception of live-in nannies, who represent a very small share of

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private care services, the welfare market in domestic services in Sweden complements rather than substitutes state-supported services. As is true for Spain, migrants form an important part of the workforce in domestic services; yet in contrast to Spain with its lax attitude towards undocumented migration and informal work, in Swedish law and society there is a low tolerance for informality and irregular migration (Hobson et  al. 2018). Both of which underlie the policy and structures for governing welfare markets.

4.3 Policy Choices and Market Governance 4.3.1 S  weden: Regulating the Market Through Tax Subsidies Among European countries that provide subsidies for domestic services, Sweden implemented one of the most generous tax subsidy policies in 2007. It entitles the buyer to a 50 percent reduction in the cost of the service with a maximum of 50,000 SEK (approximately 4625 Euros) per year for each person in the household (so that a couple could claim 9250 Euros).2 This way, though the actual cost of the service is high, the subsidy makes it affordable for the consumer, however, the subsidy does not mandate what proportion the workers should receive and may not translate into a living wage. Enacted by the liberal-conservative government, the RUT reform was highly contested by left parties, unions and some feminist groups (Kvist and Peterson 2010). The divide between right and left coalitions revolved around similar issues but widely different interpretations of the effects: job growth versus job quality; or gender equality (providing an equal playing field for women to invest in their careers versus greater social inequalities in gender and class (Hobson et al. 2018; Kvist and Peterson 2010)). The RUT was highly contentious and reflected a stigma attached to hiring someone to do one’s ‘dirty work’ in a society that prided itself on egalitarianism and solidarity between groups (Fahlén et al. 2015).

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The three main objectives of the RUT were to increase women’s labour force activity (shift from part-time to full-time work); to provide employment for a low-skilled unemployed workforce and, the most salient one, to formalize undeclared work in domestic services, that is, to grant social and employment benefits and protections to workers.3 In essence, the 50 percent subsidy was expected to cover the share paid by employers for the social costs of legal employment. This choice of policy is in line with long-standing institutional arrangements in the Swedish employment regime (Gallie 2007), in which regulation of working conditions, wages and benefits come under the auspices of collective bargaining agreements; there is no legal minimum wage. This regime is reflected in the high levels of union membership (77 percent) and coverage of collective bargaining agreements (90 percent of workers). The regulation of the sector assumed a firm-based model of employment, which would reduce the grey economy and ensure that those working in the private market would be entitled to basic workers’ rights. The generous subsidy and lack of price regulation for services were obvious financial incentives for firms to enter the market, which they did.4 The number has doubled. In 2007 (pre-RUT), there were 5000 registered companies with some proportion of domestic services employment; by 2016, there were 10,836 (see Fig. 4.2), including all those with at least 10 percent of RUT-related domestic services (Fahlén et al. 2015).5

4.3.2 S  pain: Regulating the Market Through Legislation In Spain, the policy instrument to regulate the sector was legislative. The expansion of the household service sector—as well as the establishment of the International Labour Organization’s (ILO) Domestic Workers Convention in 2011—provided unions with leverage to pressure the Spanish government to introduce significant improvements in the sector’s regulation. Household service work had been exempted from social security and unemployment benefits and taxation, legally institutionalized in 1985

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Number of Companies 12000 10000 8000 6000 4000 2000 0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2016

Fig. 4.2  Increase in the number of Swedish companies in the cleaning sector 2003–2016. (Source: Fahlén et al. 2015 (calculated from Statistics Sweden (2015a, 2015b))); 2016 data provided by Ari Kouvenon, Näringspolitisk expert Almega Serviceföretagen, based upon records from the Swedish tax authority (Skatteverket)

through a special regime, which situated these workers outside the standard legal employment rights and protections of other workers (León 2010). This regime was in effect until 2011, when the Social Democratic government passed legislation to formalize and regulate the domestic services market. The law required anyone who hired a domestic services worker to offer a job contract and pay the worker’s social security costs. Just two years later, the political winds changed, and a Conservative government watered down the entitlements in the law by adding amendments that limited protections and social benefits for most workers. Only employers who hire a worker for 60 hours or more per month, which few do, are obliged to provide a contract in which social costs are covered. Otherwise, workers must pay their own social costs (approximately 150 euros per month) and register as self-employed, a hardship given low wages (Hellgren 2015). Moreover, the enforcement of this law placed the burden on the employee to report her employer for not complying with the law; however, to do so was to cut off the hand that feeds you—a loss

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of job in a market with an oversupply of labour. In fact, the law does not provide any mechanisms for overseeing how many hours are reported by an employer or whether an employer offers a formal contract. The labour rights accorded to domestic workers have traditionally been (and continue to be) of less quality and comprehensiveness than those accorded to other workers (León 2013; Díaz Gorfinkiel 2016). The fact that the law does not extend to worker’s rights for unemployment insurance attests to this. This has been one of the main points of contention for the emerging migrant organizations within the sector.

4.4 How Markets Work in Practice To examine how domestic/care service markets work in practice poses challenges for researchers. For instance, the high levels of informality and fluidity in the sector are under the radar of official registers (Farvaque 2015), making statistical data unreliable and difficult to retrieve. To capture the complexity of how these markets work in practice, we look at the interplay of regulatory policies with how they shape the affordability and access to domestic services, as well as how they impact power and dependency in the employer-employee relationship. This requires looking at multiple actors, including users, (migrant) workers, employers and trade unions.

4.4.1 Users: Demand, Affordability and Access In Sweden, families use and prefer public services in childcare and elderly care, which are fairly extensive (Fahlén et al. 2015). The vast majority of RUT hours are used for house cleaning or extra personal services for the elderly (Bäckman 2011; Fahlén et al. 2015). People over age 75 are the most rapidly expanding group, increasing dramatically since the RUT was passed, from 29,156 to 179,727 persons (Statistics Sweden 2016; Bäckman 2011, p. 1; Sköld and Heggemann 2011). This trend reflects the growing importance of welfare markets in elderly services for replacing some of the home help public services in municipalities facing greater

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budget pressures (Björnberg 2011; Meagher and Szebehely 2013) in retrenched welfare states. Nevertheless, these services complement existing welfare services. In a sector in which 11 percent of the population are using the tax subsidy (RUT) for domestic services, few purchase these services for more than a few times a month (Riksrevisionen, interview April 16, 2018). In Spain, despite the dearth of services for elderly care, care services represent only a small proportion of the welfare markets in services. Only 8 percent of the users buy these services on a full-time basis, while the vast majority of users purchase domestic services, mainly cleaning, for less than ten hours per week (INE 2012). The 2008 financial crisis left its imprint on Spanish households’ capacity and/or willingness to continue using private domestic services. The market contracted while the supply of workers increased as both migrants and native Spanish women lost their jobs in other sectors, resulting in fierce competition for existing jobs (Marí-Klose and Martínez Pérez 2015; Hellgren and Serrano 2019). Yet, the impact of the crisis on the overall market in the domestic services sector has been less felt compared to other low-wage sectors with high proportions of migrant labour, such as construction (Spanish Labour Force Survey n.d.; Hellgren and Serrano 2019). One explanation is that although there has been a steep decline in cleaning jobs, the demand for care jobs has remained stable (Hellgren and Serrano 2019). This is an indication of how indispensable these services are for the families who use them, even in difficult economic times. What is similar in both countries is that private care/domestic services are not affordable for all families. Consistent with most studies of markets in domestic services in Europe (Carbonnier and Morel 2015), our data show that users of domestic services in private markets are among the most resourced and advantaged. Income is a decisive factor for purchasing these services. In Spain, hourly wages of domestic workers range from 8 to 10 Euros; the costs for full-time workers for elderly care is between 700 and 900 Euros a month (Hobson et al. 2018). Even though salaries paid to workers are low, for most families, these costs are prohibitive. For households in Sweden, purchasing domestic services is a luxury item. For the low-income families, who cannot afford extra services for the disabled and frail elderly, unpaid family members are picking up the

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slack in reduced public services (Nyberg 2015). Even with the high subsidy, the average cost of domestic services in Sweden is 22–24 Euros per hour contracted legally through a firm (after the RUT deduction). Lack of access to welfare markets is most pronounced in Spain where family members, mainly women, are expected to fill the care deficit, reflected in the comparatively low levels of female labour force participation (Peterson 2018; Loén 2010).6 The expectation that households will fill the care deficit reveals the weaknesses in a welfare market, which limits access to these markets to middle class families and has detrimental effects for those employed in the sector, such as underemployment and downward pressures on wages.

4.4.2 Migrant Workers We focus on migrant workers for several reasons. First, they are likely to be informal workers for a period of time, often without documentation, and are thus most affected by policies formalizing domestic services. Second, they comprise a large proportion of the domestic services market in most countries, including Sweden, and they dominate the private market in Spain (see Fig. 4.1), where they are locked into a domestic/care services market without capabilities for finding alternative employment, often lacking language skills and social networks. Our analysis on migrant workers is based upon qualitative interviews with 90 female migrants in Sweden (Stockholm) and Spain (Barcelona and Madrid), conducted in 2013–2014.7 Using Register Data, Census data, the European Social Survey and Labour Force Surveys, we established which were the largest migrant groups in the country within the migrant population, and which were the largest within-group proportions employed in the care/domestic work sector. Then we selected interviewees with a geographic spread across four continents (see Fahlén et al. 2015).

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4.4.3 Stratification Stratification in welfare markets can be based upon types of services and specific skill qualifications required. The French example of the welfare market in care/domestic work illustrates this with its elaborate classification of skills by professional training, status and types of services provided (see Ledoux et al., Chap. 12; Meuret-Campfort, Chap. 8). These distinctions are less relevant in the cases of Sweden and Spain.8 The markets are stratified in other ways. In Sweden, having ‘papers’ (formal status with Swedish identification number) is a salient dimension stratifying the market. Undocumented workers are a highly vulnerable group. They are not only paid half or less wages compared to documented workers, but also live underground, for fear of deportation. Hence, they have utterly no recourse if they are not paid their wages or abused by employers or clients (Hobson et  al. 2018; Gavanas 2010). In Spain, differences in wages between those with papers and those without are less pronounced, although some employers rather hire an undocumented migrant in order to pay less (Hobson et al. 2018). Overall, those with formal contracts are in a better position. They are more likely to have benefits (though unemployment insurance is not available to domestic workers) and have the possibility to obtain permanent residence permits. Preferences and ethnic hierarchies in the sector can affect both possibilities for employment and hourly wages in the household service sector (Williams and Gavanas 2008; Hellgren 2015; Fahlén et al. 2015). Ethnic hierarchies exist in the domestic services markets in both countries: native born are at the top followed by European migrants, and non-Europeans at the bottom (Fahlén et  al. 2015). Nonetheless, in Sweden we found little evidence of open discrimination by personal characteristics and nationality.9 In Spain, the lack of oversight in home-based employment offers greater leeway for these practices and the crisis provided a larger pool of workers to choose from. Our interviewees in Spain stated that preferences for younger, light-skinned, blond, blue-eyed girls are often part of the job profile. Spanish-born and more European-looking workers tend to find jobs more easily (Hellgren and Serrano 2019). Our respondents in Sweden emphasized that language proficiency enabled

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workers to get jobs in better firms. One Polish worker attests to this difference: ‘my friends who don’t speak Swedish or English cannot work in the firm that I work for’ (Hobson et al. 2018).

4.4.4 Working Conditions The experiences of our respondents in both countries mirror the widespread underemployment in the sector in many European countries. In Sweden, all except one respondent were working less than 40 hours per week and half worked less than 20 hours per week; only one was unemployed.10 According to a spokesperson for the Swedish union, Kommunal,11 the main problem in the sector is the lack of stability for the workers in terms of income and work hours, reflecting overall low demand and clients’ preferences for cleaning during days at the end of the week (Kommunal, interview 2014). In Spain, since the global crisis and recession, migrant domestic workers face underemployment and spells of unemployment. At the time of the interview (2013–2014), 23 out of the 42 interviewed migrants who were employed were struggling to get more work hours. There were also high levels of unemployment; nearly one third were unemployed.12 The exceptions are the live-in workers whose jobs are less precarious in terms of incomes, but who are ‘over-employed.’ All of the 19 live-in workers we interviewed worked more than 40 hours per week; many of our respondents claimed they were expected to be on duty 24 hours from Monday to Friday or Saturday, with few hours off per week. Although live-ins often have better economic circumstances than most of the hourly employed in the domestic services, they have the worst working conditions. Although the contractual relations and employment models differed in Spain and Sweden, we found instances in which migrants claimed that they were not paid for the hours they worked. In Sweden, structural features of the market shaped these practices. For example, one common practice, according to the migrants we interviewed, was that they were forced to work extra hours to complete their tasks in the contracted time that the customer and firm negotiated. Without exception, workers in

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firms complained that they were not paid for the long travelling times between jobs (sometimes three to four hours a day). In Spain, unpaid hours were often extracted from the worker within the ‘personal relationship’ in the household in the employee-employer relationship, which migrants described in terms of subtle manipulations, where the employer appealed to the migrant as ‘one of the family.’ Workers in Spain painted a darker picture of exploitative job conditions and abuse and viewed them as inherent in home-based work, which had become worse after the crisis (Hellgren and Serrano 2019). To reveal the extent to which employment in domestic services provided a living wage, we included a specific question on whether workers could manage on their incomes. In Spain and Sweden, most could not make ends meet on their earnings. However, when we included support of family (spouse or partner), many more of our respondents in Sweden claimed they were managing on their incomes.13 In Spain, the financial crisis has had deteriorating effects on available jobs, wages and working conditions. Migrant workers face competition from unemployed native born. The most recent surge in undocumented female migrants from Honduras and Nicaragua willing to take lower salaries has apparently depressed wages even further (Hellgren and Serrano 2019). Nearly half of our respondents in Spain said that they were currently or recently had been employed informally. Despite the dominance of firms in Sweden and low tolerance and reported low levels of informality (Fahlén et  al. 2015), we were surprised to find high proportions of migrants claiming they had worked without a contract. Our respondents revealed practices of both irregular and documented migrants working in the same firm, as well as individual migrants working partly formally and informally for the same firm. In both cases, migrant workers reveal similar precarious and vulnerable work situations, but there are significant differences considering the dependency of the migrant worker on her employer. In Spain, migrants are often in a more vulnerable situation, related to their fragile and often irregular migration status. Migrants without a permanent residence permit are dependent on an employer not only for a wage, but also to achieve a regularized status and renew permits. To be eligible for temporary residence status, migrants need to have proof of a legal employment

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contract, which means that they are dependent on the good will of employers who may or may not formalize their employment. Many employers will only sign a contract with the understanding that all social security costs (25.8 percent of a worker’s salary) will be passed on to the worker, even though the employer is legally required to cover 21.7 percent,14 which lacking a subsidy for social costs (which exists in Sweden), reduces the low salaries further.

4.4.5 Employers: Governance and Legitimacy In Spain, the welfare market in home-based services is dominated by direct arrangements between the household and the worker, and few intermediary actors. Firms only cover a small share of the market, and are not organized in any association or interest groups (Spanish employer’s organization, e-mail interview 2014). Employment agencies, who charge workers for job searches, have an increasing presence in the sector (Spanish trade union, interview 2013; Fahlén et al. 2015), while churches still function as employment conduits without charge. Neither of these actively mediates the employer-employee power relations in the welfare market, as is the case in some other countries (Dá Roit and Van Bechove 2015). Basically, household-based employment in domestic services in Spain lacks governance. That the user is also the employer makes it nearly impossible to control or report unacceptable job conditions. Official labour inspections in private households are forbidden by law and workers are in an extremely weak position to report unfair practices or abusive treatment. In practice, employers have total discretion to determine wages and working hours. Employers of live-in domestic workers can ignore the regulations for days off each week (Hobson et al. 2018), even when there is a formal contract. There are laws obliging employers to comply with minimum wage levels and rights, as vacations and the right to sick or maternity leave for formally contracted workers (though not unemployment insurance). However, the Achilles heel is that enforcement of the law depends on workers reporting their employer, an unlikely outcome given the competition for jobs (Hellgren and Serrano 2019).

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In Sweden, nearly all formal employment in domestic services is contracted through firms. These do not merely act as mediators between consumers and workers, but structure the market and worker outcomes by keeping wages affordable, and recruiting new workers via networks. Firms vary in size, sometimes also offering a range of other services, such as gardening and home repairs. Often in media and political debates, firms are divided into two categories, reputable or disreputable, a shorthand for those who are willing to sign collective agreements with workers with decent wages and social benefits and those who do not (Swedish trade unions Kommunal and LO, interviews 2014). Although they represent only a small part of the market (14–18 percent), the two largest firms, Hemfrid and Homemaid and their advocacy group, the employers’ association Almega, have played a central role as legitimizers of the sector, profiling themselves as ‘reputable firms.’ They are classic policy takers (Gingrich, Chap. 2) emerging from the RUT reform that has enabled them to become a powerful lobbying group. They defend the RUT against its antagonists, trade unions and left party politicians, who disparage the sector as a low-wage, precarious sector that should not be subsidized by citizens’ taxes. These advocates have made a strong case for the RUT in political discourse as the best means to curtail informal work and attribute blame for the precariousness and poor conditions to smaller disreputable firms (Almega, Hemfrid, Kommunal, interviews 2014; Hellgren 2015). Yet, small firms are the predominant group in the sector (Fahlén et al. 2015).15 The largest Swedish company for private domestic services, Hemfrid, employs around 1600 domestic workers of 40 different nationalities in Sweden (of whom about 1000 in the metropolitan area of Stockholm). It portrays itself as a responsible firm; they offer wages at the level of collective agreements (a full-time monthly gross salary would be equivalent to 1800 Euros). However, 90 percent of its more than 1800 employees work half-time, and it has no full-time employees. Low and variable demand necessitates a flexible workforce; Hemfrid rationalize the lack of secure employment in the sector in terms of a transitory phase for migrants who have the ambition to study and move to other sectors (Hemfrid, interview 2014). However, existing data suggests otherwise. One government report shows that more than half were still working in the sector three to

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five years after they began working in domestic services (Tillväxtanalys 2018). Sanchez-Dominguez and Fahlén (2017) found that only those who had obtained education via the Swedish system were able to move to clerical or professional jobs. Expectations that firm-based employment would transform the sector into formal work and create a well-regulated market with formal contracts and decent working conditions, was based on faulty assumptions: (1) that firms in the household service sector would follow the norms in the Swedish model adhering to collective agreements; and (2) that a strong union presence could be a channel for grievances. In fact, less than 400 of the companies in the sector have signed collective agreements (Kommunal, e-mail interview 2019). The trade union Kommunal representing workers in the sector estimates union membership in the sector at 15 percent (compared to 76 percent nationally), and even in the two large firms it is only 35–40 percent of workers (Kommunal, Almega, interviews 2014; Kommunal, e-mail interview 2019).

4.4.6 P  otential for Change: Trade Unions and Grass Roots Mobilization Trade unions have the potential to play an important role in improving conditions of workers in the sector (see van Hooren, Chap. 14). The main Spanish trade union CCOO (Comisiones Obreras) has played a comparatively active role in migrant domestic worker struggles. They were a strong advocate for the implementation of the new labour law for domestic workers referred to earlier in the chapter, and participated in the negotiations with the Spanish government preceding its approval in 2011. CCOO has also supported earlier claims for regularization of undocumented migrants. Although CCOO has also attempted to increase affiliation rates among migrant domestic workers, union membership among this group of workers remains very marginal.16 Meanwhile, domestic workers increasingly self-organize and have joined forces with NGOs who have been strong advocates of rights for domestic workers, and unions, including CCOO and the other large Spanish trade union,

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UGT. These trade unions created a platform in Catalonia called Defence of the rights of household, cleaning and care workers, together with four different grassroots networks representing migrant domestic workers. They demand that Spain ratify the ILO’s convention 189, recognizing domestic work as equal in rights and conditions to any other forms of employment.17 High levels of precariousness in Spain, low overall union membership and difficulties in organizing workers employed by households both act as barriers for unions pressing for better conditions for domestic/care workers. Moreover, one cannot discount the potential backlash or political fallout from users who depend on low-wage migrant workers (Hellgren 2015). Since the passage of the RUT, Swedish unions, even those representing the interests of domestic services workers have shown ambivalence towards organizing the sector, even whether this market should exist at all. The umbrella organization of Swedish trade unions (LO) has argued that the expansion of the sector marks a return to old class structures of masters and servants. In their view, it represents an increasing acceptance of inequalities on the labour market; a rapid and unwanted change of the egalitarian Swedish society (ibid). However, recognizing the RUT has gained legitimacy and been expanded, union leaders have begun efforts to increase union membership among household service workers. A spokesperson for the local union representing household workers, Kommunal, claims that they have 3000 members out of an estimated 30,000 workers in the sector (Kommunal, email interview 2019). They have reached out to the Employers’ Association and the largest companies in the sector, and are now negotiating with Homemaid, the second largest company to gain access to recruit their workers (Kommunal, email interview 2019). Union initiatives are a positive sign; however, migrant workers are passive members in Swedish unions, lacking representation and voice. So far, there is no push from below; no migrants’ rights organizations or advocacy groups seeking to activate grassroots mobilization, which has happened in many countries, including the United States, Spain, the Netherlands and many other countries around the globe (Boris et  al. 2015; Eleveld and Van Hooren 2018). Historically, unions have been and remain the main channel for worker protections and rights in Sweden.

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Despite increasing success with larger firms, unions still face many constraints from recalcitrant small firms and in reaching out to workers with many different languages. Whether they have the resources or the will remains to be seen.

4.5 Discussion Comparing welfare markets in countries considered ‘different cases’ in welfare regime theorizing, we have highlighted how market mechanisms operate; whether strategies to formalize work can have an effect on a sector notorious for its precariousness and low-quality jobs. The welfare market in Spain relies on the supply of low-wage migrants; in Sweden, it depends on a generous subsidy, both of which keep the cost of services within reach of the middle classes. Our ‘different’ cases have allowed us to explore how two employment models (firm-based and household-based) shape the dynamics of welfare markets. Finally, as other studies have shown (Shire 2015), we emphasize that affordability is a crucial dimension for the sustainability of welfare markets in domestic services. In short, we are engaged with the broader question of how institutional contexts matter in the outcomes of the household service sector. Despite apparent differences in these two institutional contexts, we find similarities in the general patterns of how these markets work in the everyday lives of migrants employed in them; precariousness, unemployment and underemployment, and low wages. The market mechanisms explaining these similarities in our two ‘different cases’ underscore how the dynamics of markets are context-specific. In Sweden, profit maximization and market competition among hundreds of firms that exceed the demand drive underemployment and low wages. Unpaid travel times and demands that workers work extra hours reduce earnings. In Spain, the oversupply of workers and lowering of demand since the crisis has heightened the discretionary power of employers resulting in deteriorating working conditions and lower wages. In both countries, migrant workers do not often have the capabilities to leave the sector and find better jobs; they have lacked voice in political spheres, although recent developments suggest that there are some positive signs on the horizon, with union

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activity and mobilizations. Nevertheless, those benefitting from the status quo have powerful actors on their side. Spain and Sweden have sought to deploy different strategies to formalize the market. From the perspective of policymakers in welfare markets, a central question is to what extent policy strategies for formalizing the sector actually reduced levels of informal work. There is evidence in both countries that informal work has declined. In Sweden, prior to RUT, nearly all household service employment was informal; one study estimated that 10 percent of households were hiring undeclared domestic workers just before the reform of the Skatteverket in 2007. A survey of users in Stockholm in 2013 revealed that 21 percent of the users who had purchased services illegally before the RUT were employing someone formally (Fahlén et  al. 2015). Comparing users of services in 2005 and 2019, the most recent study by the tax authorities claims that informal work has been significantly reduced from 32 percent to 13 percent (Franzon 2020, p.  10).18 Although Spain remains at the high end in informal work in the sector compared to other European countries (Farvaque 2015; Gallotti and Mertens 2013), according to the Spanish Labour Force Survey, informality has decreased significantly since the legal reform (from the highest level, 60 percent, in 2005, to 38–42 percent, estimates in 2013 (Díaz Gorfinkel 2016)). From the perspective of workers, the main issue is the extent to which these policy strategies produced better outcomes: decent working conditions, access to social benefits and protections and less precarious employment. One implication of our analysis is the resiliency in these markets to regulation, even in a firm-based model, highlighting how difficult it is to undo the notion of domestic services as precarious, low-waged and gendered migrant work. We also revealed some unintended consequences that can result from pressure on employers to formalize the sector, which can weaken the capabilities of migrant workers and increase their dependency on employers. For instance, the passing on of social costs to the employee in exchange for a formal contract, which migrants need in order to gain a residence permit. In Sweden, the intolerance towards informal work and the lack of regulation of small firms has placed the undocumented and paperless migrants, those waiting for a permit to work, at the mercy of unscrupulous employers (Hobson et al. 2018; Gavanas 2010).

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This study resonates with the broader question of what a well-­ functioning welfare market is. In relation to labour, the failure in regulating these markets is reflected in the inability of migrant workers to earn a living wage. Whereas a standard measure of functioning labour markets is the matching of worker skills with existing opportunities, the data from the Swedish case bely this. Women working in the sector are highly educated: 50 percent have secondary education and 19–24 percent have tertiary education (Sánchez-Domínguez and Fahlén 2017). This deskilling of labour and lack of recognition of credentials of migrant female workers in domestic services is documented in other European studies (Williams 2012). In addition to the labour dimension, access and distributive effects are core criteria for a well-functioning welfare market (see Ledoux et al., Chap. 1). The limited access to the market in domestic services for the elderly in Spain epitomizes the deep inequalities found in many countries with respect to care deficits. In Sweden, welfare markets represent redistribution upwards of state resources to the most well-resourced in society rather than to those who have the most need, a departure from the universalism in family policy.

Notes 1. In fact, there have been political initiatives to address the acute elderly care deficit in publicly funded eldercare. In 2006, the Socialist government approved the Law on Dependency (Ley 39/2006), which aimed to provide long-term care services to elderly and dependent people, but it reaches a small proportion of those in need and has been deeply affected by the austerity cuts introduced in 2011 (Benería and Martínez-Iglesias 2014; Ibáñez and León 2014). 2. In 2016, the maximum tax subsidy was reduced to 25,000 SEK for those younger than 65, but was raised again in 2018 by the neoliberal parties in coalition with the Social Democrats. 3. These are the goals that are being evaluated in a report in progress from the government oversight agency: Riksrevisionen (interview April 16, 2019).

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4. A change in the tax law in 2009 made it easier for individuals to purchase services through firms since the firm could deduct the subsidy directly from the cost, referred to as the invoice model (Tillväxtanalys 2018). 5. Their estimates are drawn from tax records, which include offering multiple services. The Employer’s association, Almega’s estimates are based on their records (interview 2014). 6. Reflecting the expectations and practices, the state provides a small benefit for persons who are caring for family members. The benefit has been criticized as re-enforcing women’s role as carers (Martínez-Buján 2014). 7. For a detailed description of the data, including recruitment strategies, see Fahlén et al. 2015. 8. In Sweden, those employed in public sector home services through the municipality are required to have some training and have better working conditions and higher wages (Fahlén et  al. 2015). In Spain, those employed through the regional authorities and outsourced to companies, since 2018, are required to have minimal training and experience, but these represent a very small portion of the market in home care services (Hobson et al. 2018). 9. There is an  active government agency, Discrimination ombudsman (DO) in Sweden, where formal complaints are investigated. 10. Two others were formally employed though not working at the time, one on parental leave and another on study leave. 11. Kommunal is the union for municipal workers, and currently estimates around 30,000 workers in the sector and 17,000 companies (e-mail interview 2019); however, there is a growing proportion of single-earner firms in which nearly half are single-earner firms owned by women (Riksrevisionen, interview April 2019). However, we do not know if these firms, registered as single earner, are employing workers illegally. 12. These proportions of the unemployed are consistent with NGO estimates at that time, and in line with national statistics which at that time were 27 percent (Spanish domestic worker’s NGO, interview 2013, ine. es, November 2013). 13. This is a reflection of the difference in migration regimes. Family reunification has been an integral part of Swedish migration law and practice; a significant proportion of migrants enter that way (Hobson et al. 2018). 14. Those who work less than 60 hours per month by the same employer are required to register and pay their own monthly social security costs as

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self-employed, about 150 Euro (http://www.empleo.gob.es/es/portada/ serviciohogar/, 12/5/2014). 15. Small firms are defined as those with 2–9 employees; larger firms as those with 50 or more employees. 16. Union membership levels in Spain are generally low, currently at 13.9 percent (https://www.libremercado.com/2019-­05-­01/la-­pertenencia-­a-­los-­ sindicatos-­baja-­del-­171-­al-­139-­durante-­la-­ultima-­decada-­1276637541/, 01/05/2019). 17. See: http://catalunyaplural.cat/es/trabajadoras-­hogar-­crean-­catalunya­mesa-­para-­defender-­sus-­derechos/ 18. The report includes both the RUT and ROT (housing repairs). Since purchasing informal services is against the law, the report indicates that their figures may be an underestimate, especially in the period before the RUT.  In the 2005 survey of domestic services, 29 percent did not respond to the question on hiring informal work: only 1 percent in 2019 did not.

References Bäckman, J.-E. (2011). Om Rut och Rot och Vitt och Svart. Report commissioned by Skatteverket: Report 2011, n°11. Benería, L., & Martinez-Iglesias, M. (2014). Taking Advantage of Austerity: The Economic Crisis and Care in Spain. Working Paper Series on Work-Family Balance and Gender Equality: A North-South Policy Perspective. Istanbul: Istanbul Technical University Women’s Studies Center (ITU-WSC). Björnberg, U. (2011). Care, Gender and Ethnicity. Perspectives on Domestic Work and Care in Sweden. In I. Höjer & S. Höjer (Eds.), Familj, vardagsliv och modernitet. En festskrift till Margareta Bäck-Wiklund (pp.  211–228). Göteborg: Institutionen för Socialt Arbete, Göteborgs universitet. Boris, E., Jokela M., & Unden, M. (2015). Enforcement Strategies for Empowerment: Models for the California Domestic Worker Bill of Rights An Informational Policy Report. https://www.researchgate.net/publication/ 319068880_Enforcement_Strategies_for_Empowerment_Models_for_the_ California_Domestic_Worker_Bill_of_Rights_An_Informational_ Policy_Report Carbonnier, C., & Morel, N. (Eds.). (2015). The Political Economy of Household Services. Basingstoke: Palgrave Macmillan.

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5 The Failure of a Welfare Market: State-­ Subsidized Private Pensions Between Economic Developments and Media Discourses Frank Nullmeier

5.1 Introduction At the beginning of the new millennium, the German government created a new market, a market for state-subsidized pensions. This state-­ created and state-funded market, supported by discourses from the leading political parties of the country, marked a leap into a new era of social policy. The creation, organization, and stabilization of markets are main issues of the new sociology of markets (Fligstein 2001; Aspers 2011; Beckert 2016; Brunsson and Jutterström 2018; Vogel 2018). The German experience of the Riester pension market, started in 2001, adds to the previous sociological literature on markets a specific case of market failure, the stagnation of a welfare market designed to expand for reasons of social protection. The market for Riester pension plans, after initial expansion, has stagnated at a medium level of uptake. The following study on the negative dynamics of a welfare market explains why this F. Nullmeier (*) University of Bremen, Bremen, Germany e-mail: [email protected] © The Author(s) 2021 C. Ledoux et al. (eds.), The Dynamics of Welfare Markets, Work and Welfare in Europe, https://doi.org/10.1007/978-3-030-56623-4_5

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form of market failure has occurred, and why the market for Riester pensions is nonetheless still being supported politically. The transformation towards a three-pillar system is the most important development in pension policy since the mid-1990s (Orenstein 2008; Leisering 2011; Leimgruber 2012; see for Germany: Bönker 2005; Ebbinghaus et al. 2011; Schmähl 2011a; Nullmeier 2014; Bode & Wilke 2014; Wilke 2016; Nullmeier 2018b; Schmähl 2018, p.  1103–1107). Recommendations by the OECD and the EU Commission continue to promote this development, and in most EU and OECD countries, the expansion of private old-age insurance has progressed along these lines (OECD 2017). In Germany, the establishment of a three-pillar model was closely linked to the introduction of a state-subsidized private pension scheme in 2001, which was nicknamed the ‘Riester pension’ for the then Minister of Labour, Walter Riester. Before 2001, the state promoted private pension schemes (life insurance policies) by means of tax benefits. But the link between reductions in pension benefits in the German Statutory Pension Insurance Scheme (Gesetzliche Rentenversicherung, or GRV) and the promotion of different types of private pension provision (investment fund plans, bank savings plans, insurance plans) by means of state incentives (allowances and tax credits) was very new in German pension policy. The third pillar was introduced as an additional and voluntary element of individual pension provision for everyone. But political measures were taken to establish private pension plans as an economic necessity in order to maintain the standard of living after retirement. The introduction of this additional private pension scheme can be seen as a case of layering, but in a specific configuration, because of the zero-sum relationship between cuts in the public pension system and the establishment of a private pension scheme. The Riester pension thus implied a new level of commitment to private efforts to care for pension products. Thus, the future of the threepillar model in Germany is closely linked to the development of the Riester pension. With the establishment of a private pension scheme, the government created a state-subsidized market for old-age provision, a new politically shaped, regulated, and state-­supported welfare market,

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that provides pensions through the competitive activities of financial service providers (see Ledoux et al., Chap. 12; Gingrich 2011; Willert 2013; Köppe 2015; Crespy 2016). Additionally, the federal legislation on the Riester pension scheme contained some regulations for private providers, including life insurance companies, banks, building societies, and other financial service providers. After years of growth (see below), the market for Riester pensions passed into a phase of stagnation. The targets proclaimed by the government in 2001 have not been achieved owing to this decreasing rate of growth. In just the first ten years, the evaluation of the Riester pension in the scientific literature was quite negative (Blank 2011, Hagen and Kleinlein 2011, Kleinlein 2011, Schröder 2011). Today, nearly two decades since the establishment of the Riester pension scheme, the welfare market for state-subsidized private pension products is in a phase of stagnation, and public opinion agrees with the statement made several years ago by Horst Seehofer, at that time the Bavarian Prime Minister: ‘Riester has failed’ (‘Riester ist gescheitert’; April 8, 2016). This development is quite surprising and contradicts the expectations of a worldwide expansion of three-pillar systems.In Sect. 5.2 of this chapter, I define the failure of a welfare market and provide some indications of how to measure it. Subsequently, the question arises as to how to explain the failure of the welfare market for Riester pensions. Which forces have led to such an inauspicious development in this new form of old-age provision that at the beginning of this century was being celebrated as a future-oriented and necessary investment for the whole population? The main argument concerns discursive changes in the media, the decline of positive assessments of the Riester pension scheme, and the emergence of negative evaluations including a ‘failure frame’ (Sects. 5.3–5.5). The failure of a welfare market does not necessarily mean that the political promotion of the market with state subsidies will be restricted or even stopped. A failed welfare market can continue to exist. Section 5.6 discusses why this is happening in the case of the Riester pension in Germany, and shows why political actors continue to adhere to the Riester legislation. Thus, Sect. 5.7 contributes to explaining why no policy change has taken place even though the market for private pension provision has failed.

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5.2 Definition and Measurement of the Failure of a Welfare Market I define the failure of a welfare market as a contradiction between the original goals in the field of social provision at the time of its establishment, and its social outcomes once established. Studying failure (or success) requires examining the original political goals, and the development of welfare market outcomes. In the case of the German Riester legislation, the goal of the government was to secure income in old age by supporting two pillars: the statutory pension insurance and a private, but state-subsidized pension system. Achieving this goal required, that all pensioners have a private pension contract in addition to their membership in the statutory pension system. Thus, high private pension coverage was a necessary condition for meeting the social objective of the government. The welfare market for Riester pensions was designed for expansion with a coverage rate approaching 90 to 100 percent in the long run. If the expansion of a welfare market is the explicit political goal, then stagnation or declining coverage is evidence of its failure. As a consequence, what could be determined as decline or stagnation needs to be specified. Since the failure of a welfare market would already be evident in the case of its stagnation, this chapter focuses on its stagnation. Stagnation can be defined using the economic terminology of market volume and market potential. A stagnation of a welfare market is thus present when: –– the market volume grows only at a low rate for a relatively long time period, –– the market volume remains static, –– the market volume shrinks even though the market potential does not, –– smaller growth rates of the market volume are connected with a marked gap between the market volume and the market potential. In the case of Riester pension plans, the number of concluded contracts is a central indicator of the market volume. The market potential is defined as the number of persons who are entitled to participate in a

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state-subsidized Riester pension plan. The market potential cannot be determined exactly, but estimates amount to a total of 34.4 million persons in 2015. The market volume as the number of concluded contracts (including dormant ones) reached a total of 16.6 million contracts at the end of the third quarter of 2018. According to the Federal Ministry of Labour and Social Affairs, the share of dormant contracts (meaning no contributions were paid in the last year) amounts to 20 percent. It should also be noted that a person can enrol in several Riester pension plans. Therefore, the number of persons who will benefit from a Riester pension plan is probably less than 16 million. Growth rates of the number of contracts fell from 1.85 percent in 2014 to 1.1 percent in 2015 and to −0.01 percent in 2018 (Table 5.1, Fig. 5.1). Since a person can enrol in more than one Riester plan, the relationship between market potential (34.4 million people) and market volume (16.6 million contracts) comprises a ratio of less than 50 percent at the end of 2018, that is, seventeen years after its implementation. This is a Table 5.1   Development of the number of Riester pension plans (in thousands) Products End of Year

Insurance Plans

Bank Saving Plans

Investment Fund Plans

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1.400 2.998 3.451 3.557 4.524 6.388 8.194 9.285 9.995 10.484 10.998 11.023 11.013 11.030 10.996 10.931 10.881 10.819

– 150 197 213 260 351 480 554 634 703 750 781 805 814 804 774 726 676

– 174 241 316 574 1.231 1.922 2.386 2.629 2.815 2.953 2.989 3.027 3.071 3.125 3.174 3.233 3.293

Home-annuity Contracts

Total

22 197 460 724 953 1.154 1.377 1.564 1.691 1.767 1.810

1.400 3.322 3.889 4.086 5.358 7.970 10.596 12.248 13.454 14.462 15.426 15.746 16.000 16.293 16.489 16.570 16.607 16.597

Source: Bundesministerium für Arbeit und Soziales (2019)

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18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2000

2002

2004

2006

2008

2010

Insurance Plans

2012

2014

2016

2018

2020

Total

Fig. 5.1  Growth in the Number of Riester pension plans (2000–2018)

remarkably low percentage given that the introduction of the Riester pension was linked to a substantial reduction in pensions for all insured persons in the German Statutory Pension Insurance Scheme (GRV). Compensation for the reduction in pension benefits should be achieved by widespread enrolments in Riester plans. A low market saturation of the welfare market for state-subsidized old-age pension products implies a deterioration in the financial situation after retirement for many out of the total number of 36.5 million actively insured persons or 53.3 million actively and passively insured persons, the latter being those who were not insured at the end of 2015 but had periods of coverage before 2014 and did not receive pension benefits from the GRV by the end of 2014 (Deutsche Rentenversicherung 2016). A second indicator for the volume of the welfare market is the sales volume. Data are only available for one product variant of Riester pensions: insurance policies. The current sales volume for Riester insurance policies

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amounts to 5.5 billion euros in 2015. By 2009, the 5-billion-euro threshold had already been exceeded. Since then, the sales volume has only grown to a small extent. After an increase of 0.3 percent in 2010, the growth rate decreased from 6.5 percent in 2011 to 1.3 percent in 2012, to 0.5 percent in 2013, 1.5 percent in 2014, and 0.2 percent in 2015. Likewise, the number of plans increased until 2011 but declined thereafter, by 0.2 percent in 2013 and 0.4 percent in 2015 (GDV 2016, Table 38). A third group of indicators for the stagnation of a welfare market can be seen in data on government subsidies. In addition to the number of subsidized persons (a), the amount of government spending (b) should be considered. (a) An increase in the number of beneficiaries can be interpreted as an indication of the expansion of the welfare market. Since 2010, the number of beneficiaries has totalled over 10 million people, but it increased slightly from 10.5 million in 2010 to 10.9 million in 2013. Between 2011 and 2012, there was a drop from 10.8 to 10.7 million beneficiaries (Bundesregierung 2016, p. 141). (b) The volume of government expenditure (allowances and tax credits) reached 3.66 billion euros in 2013. Here again, the growth rate was quite low when measured from 2008 when the 3-billion-euro threshold was exceeded for the first time. At the same time, the slowdown in the growth of the allowances was much more pronounced. Therefore, tax subsidies received a higher share of the total expenditure. Including these 3.66 billion euros in government expenditures, the total volume of contributions for Riester pension products was 10.4 billion euros in 2013. The state’s subsidy rate was 34.1 percent (Bundesregierung 2016, pp. 146–149). The ratio of state subsidies to market volume is crucial. If market volume decreases and the state subsidy rate increases, declaring a welfare market as stagnant is justified. According to the data presented above, growth in the number of Riester plans, sales volumes, and state subsidies are approaching zero. All indicators point to the stagnation of, and in conjunction with the original political goals, the failure of the welfare market for private pension plans.

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Why has this failure of the Riester welfare market occurred? Why has the welfare market stagnated for state-subsidized private pensions in Germany since the end of the 2000s? To answer these questions, a comparative explanatory strategy, though a very interesting research design, especially when one considers that welfare markets for private pension provision have developed more positively in other European countries, is not taken. Instead, the focus is on an explanation for a single case. However, given the limited space of this chapter, an explanation of an economic and political process that has lasted more than 15 years cannot be provided using the very fine-grained research design and method of ‘process tracing’ (Beach and Pedersen 2019). Instead, the analysis in this chapter undertakes a preliminary study of relevant explanatory factors, which can form the basis for a more detailed inquiry into the causes of failure. The approach used here approximates a multiple stream approach (Kingdon 1984; Herweg et al. 2015), which in this case, focuses on politics, economics, and discourse as the three independent ‘streams’. In reference to the first stream, the rise and fall of a welfare market is expected to depend on political decisions and legislative activities. Have legislative activities led the Riester welfare market in the direction of expansion or decline? Is politics the primary cause of the stagnation of the market? The second stream refers to the effects of economic development, especially of financial markets. Did the welfare market follow the development of interest rates and inflation? In the third stream, the concern is with the public perception of the Riester pension, a factor that may have influenced market volume. Did the policy discourse on Riester pension plans reflect the political or economic developments?

5.3 L egislation Doesn’t Matter: The Ineffectiveness of Reforms The development of a welfare market should be distinguished from the rise and fall of a (sub-)policy, as what is at issue is the entirety of policy measures, legislative activities, and political demands in a policy field. From a political-science perspective, the welfare market can be seen as a

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policy effect or as a policy outcome that can be distinguished from policy output, namely, legislative activities. It is possible that policy effects will not occur regardless of the level of legislative activities. The welfare market for state-subsidized pension products is a state-constituted market structure, which is a policy effect of a new pension policy. The Riester welfare market owes its existence to a shift in policy output from tax cuts for life insurance policies to allowances for a wider range of financial products (Berner 2009). After the creation of the Riester welfare market in 2001, legislation (including legal decrees) in the field of pension policy continued and may have had effects on the expansion or stagnation of the new market. The Riester legislation has been amended several times during this period (see Table  5.2). The types of eligible products have expanded, and the regulation of Riester products has intensified. Policy dismantlement (in the sense of Bauer and Knill 2014) has not occurred. All governing parties in the period from 2004 to 2017 (until 2005, a Social-democratic coalition with the Greens; from 2005 to 2009, a Grand Coalition; from 2009 to 2013, a Christian Democratic coalition with the Liberals; and from 2013 until today, a Grand Coalition) intended to make the Riester plans more attractive and to expand the welfare market. In particular, the 2004 reform simplified numerous regulations for providers and consumers, which have been seen as helpful in the insurance sector. The implementation of the unisex tariff in 2006 made the Riester pension more expensive for men and cheaper for women because of the difference in life expectancy between men and women that is included in the calculation of premiums. A huge advertising campaign (for men, in an obviously sexist manner) to conclude a Riester contract before the launch date of the unisex tariff (01/01/2006) had a positive, but short-­ term effect on the welfare market. The conditions for the eligibility of allowances have improved, and the amount of state subsidization has increased. A new product type, home-annuity contracts (called ‘Wohn-­ Riester’), was created in 2008 (see Köppe, Chap. 6). The simplification of the regulatory framework was a characteristic feature of Riester legislation in 2004. The expansion of consumer protection marks the entire period of legislation from 2004 to 2017. Therefore, the stagnation of the welfare market cannot be attributed to a lack of legislative activities. The

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Table 5.2   Reforms of the German Riester pension 2004–2018 Year of implementation (law)

Financial

2005 (AltEinkG 2004)

2006 (AltEinkG 2004) 2007 (RV-Altersgrenzen-­ anpassungsgesetz) 2008 (EigRentG)

Child allowance €300 (prev. €185), extra one-off allowance (€200) if contract before 25th birthday; removal of fixed capital amounts for mortgage deposits (Wohnriester)

2009 (Bürgerentlastungsgesetz Krankenversicherung) 2010 (EUStVUG)

Information

Basic pension (Rürup pension, Basisrente), lump sum share decreased to 30 percent (previously 40 percent), certification simplified Unisex tariffs Increase of earliest retirement age (from 60 to 62) Notional home subsidy account (Wohnförderkonto)

One-time start-up bonus of 200 euros Cross border mobility within EU Vesting rights (max Increased €150 fee, new information provider admin fees requirements: only on 50 percent product of capital) information sheet Redesign of product information sheet

2013 (Altersvorsorge-­ Verbesserungsgesetz)

2017 (AltvPIBV)

2018 (Betriebsrentenstär-­ kungsgesetz)

Regulatory

Basic allowance increased from €154 to €175

Sources: compiled by author with Stephan Köppe, based on Leisering (2011), Kleinlein (2011), Blank (2016) and http://www.sozialpolitik-­aktuell.de; http://www.portal-­ sozialpolitik.de

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governing parties had always tried to improve the attractiveness of Riester plans for consumers and providers. The Altersvorsorge-Verbesserungsgesetz (Old-Age Provision Improvement Act) in 2013 improved the conditions for consumers through the introduction of a product information sheet. However, this did not lead to a significant increase in new enrolments. Nevertheless, consumer issues have dominated more recent parliamentary debates. Political discussions have been concerned either with shortcomings that continue to exist with regard to the transparency and quality of Riester products or with practices of insurance companies used to meet their increased responsibilities towards informing consumers. Thus, the providers’ obligation to make an information sheet available has been implemented very differently among the insurance companies. Correspondingly, the design of product information sheets (length, comprehensibility) and the types of cost and yield indicators are in some dispute. Despite the political struggle for consumer-oriented policy reforms in 2013 and 2016, these initiatives did not create a new incentive for consumers to enrol in new plans but were rather perceived by the insurance industry as impairments. In summary, legislation has constantly accompanied the Riester pension with the aims of supporting the expansion of the market and meeting consumer needs. The failure of the welfare market took place despite such ongoing political support. However, the political actor constellation that supported the Riester pension weakened. At the beginning of the 2000s, the traditional political actor constellation in pension policy that brought together Social Democratic Party (SPD), the left wing of the Christian Democratic Union (CDU), the German Trade-Union Federation (DGB), and the German Employers’ Association (BDA) collapsed temporarily, while the influence of the financial service industry representatives expanded (Wehlau 2009; Leifeld 2013). This became the precondition for the creation of the third pillar in the German pension system and the implementation of Riester pension products (Nullmeier 2011; Wiß 2011, 2012). After the adoption of the Retirement Age Reform Act in 2007 (Schmähl 2011b), a revival of the old pro-welfare-state coalitions and corporatist forms of cooperation took place (Nullmeier 2011). Even the conservative–liberal coalition government was unable to launch

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substantial reforms in favour of private pension provision in the period from 2009 to 2013. With the beginning of the Grand Coalition in 2013 and the takeover of the Ministry of Labour and Social Affairs by the social-­democrat Andrea Nahles (SPD), further expansion of private pension provision became even more unlikely. The coalition agreement between the SPD, the CDU, and its sister party, the Christian Social Union (CSU) (Dünn and Stosberg 2013) suggested that the demands of the trade unions for strengthening public pension schemes could find the consent of all parties in the government. A renaissance of social insurance corporatism (Klenk et  al. 2012) seemed possible. The Riester pension disappeared from the governmental agenda; the ministry concentrated on reform plans for occupational pension schemes and finalized the Betriebsrentenstärkungsgesetz (Occupational Pension Improvement Act) in July 2017. Today, the expansion of the Riester plans has reached a plateau and despite a new stream of corporatism, the market for Riester products is well established.

5.4 It’s the Economy? Interest Rates and the Stagnation of the Welfare Market The performance of a funded pension scheme depends on the development of interest rates in capital markets. Is the stagnation of the Riester welfare market the result of interest rate developments, in a particular protracted period of low rates? The beginning of the low-interest-rate phase in the euro zone can be dated back to 2008–2009. We use the ECB interest rates for deposit facilities as a reference point to define the low-­ interest period. The interest rate for deposit facilities fell from 3.25 percent in October 2008 to 0.25 percent in April 2009 and remained at this level until April 2011. In July 2012, the ECB set the interest rate at 0.0 percent. The interest rate declined slowly from −0.1 in July 2014 down to

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−0.4 percent in December 2016 (Deutsche Bank 2017a). Money market rates (EURIBOR three-month money, monthly average) may be used as an alternative indicator. This interest rate fell slightly below 1 percent in July 2009, recovered quickly to 1.58 percent in October 2011, and then decreased to a level of 0.2 percent in 2012 and 0.3 percent 2013. In 2014, the interest rate decline continued and reached −0.32 percent in December 2016 (Deutsche Bank 2017b). The trends in the total number of Riester pension enrolments show remarkable parallels to the trends in interest rates. After a rather slow start from 2001 to 2004 with 4.3 million Riester pension plans and a steep increase to a total of 12.25 million enrolments from 2005 to 2008 (an increase of almost 200 percent), growth rates flattened from 2009 to 2011. From 15.4 million contracts at the end of 2011, the progressive rise to the current figure of 16.5 million enrolments at the end of October 2016 is quite low. Since the end of 2015, the growth rate has fallen to 0.15 percent. In short, the Riester pension was introduced during a period of high interest rates. The number of plans increased until the beginning of the global financial market crisis. When the low-interest phase began, the growth flattened until reaching its current standstill. It is therefore possible to construct a relationship between the total number of Riester pension enrolments after 2009 and the low-interest phase. It could be assumed that the increase from 2009 to 2011 was still based on the expectation that interest rate developments would only be unfavourable in the short term. After 2011, however, perhaps as a result of the euro crisis, there might have been a widespread perception that the interest rate would remain at a low level for a very long time. An economic explanation of the tendency towards stagnation in the market for private pension products makes use of a micro-level assumption. That is to say, interest rates are of greater importance for individuals than the oft repeated line in the insurance industry that a private pension plan is a necessary and indispensable element of old-age provision because of the deficiencies of the GRV system. A further assumption is also required for an economic explanation that relies on interest-rate development: divergent discursive trends in the media were unable to mitigate the importance of the interest rate in individual purchase decisions.

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5.5 D  iscourse Follows Economics? The ‘Inefficiency Turn’ in the Policy Discourse The public assessment of policies in the media and the evaluation of policies in academic debates are important factors in the achievement of a policy and in the expected policy effects, here the Riester pension market. These assessments take place in public policy discussions, which might be named ‘policy discourses’. Policy discourse is defined as the entirety of all public statements on a specific policy, including evaluations of the policy as a whole, of individual reforms, specific policy instruments, and levels of provision. This discursive dimension of the dynamics of welfare markets can be analysed by text-analytical methods. Here, the method of political valuation analysis has been used (Schmidtke and Nullmeier 2011) (Fig. 5.2). In the following, a small section of the Riester policy discourse is analysed. The data base comprises all articles published between January 1, 2005, and December 31, 2016, on Riester pension plans in the daily newspapers Die Welt (conservative) and Süddeutsche Zeitung (SZ, left-­ liberal). The body of texts includes 2334 articles (1411 SZ, 923 Die Welt). In this text corpus, 946 evaluative statements (positive or negative)

Fig. 5.2  Policy discourse, expert arenas, and the general public

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about Riester pension plans have been identified. The usage of political valuation analysis allows us to identify not only positive and negative evaluations of the Riester pension scheme but also the standards or criteria of these evaluations (Fig. 5.3). Statements in favour of the Riester pension prevailed among the German public from 2005 to 2008. Two years of balanced evaluations followed. At the latest in the year 2011, the political atmosphere tipped and negative arguments dominated the policy discourse. In times of predominantly positive assessments, the press praised the 2004 reform for the reduction of bureaucratic hurdles and argued that the Riester pension plans were profitable for nearly all social groups within the population (Fig. 5.4). A central question in policy discourses is the question of success or failure of a political reform. Today, the Riester pension reform is mainly evaluated as having ‘failed’, even by political actors who are

Fig. 5.3  Development of positive and negative statements about Riester pension plans from 2005 to 2016

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Fig. 5.4  Arguments supporting Riester pension plans (Die Welt, SZ) from 2005 to 2016

fundamentally favourable towards a dynamic market economy and private pension schemes (e.g., the CSU). The failure of the welfare market may therefore be associated with the rise of a ‘failure frame’ in the policy discourse. But the “failure frame’ was only created in April 2016. The party chairmen of the CSU and of the SPD used the word ‘failed’ and started an ongoing discussion on the success or failure of the Riester legislation. A very first mention of the term ‘failure’ goes back to April 2011 as a member of the Bremen consumer protection agency used the term ‘failure’, but with a question mark. The failure frame sharpened the previous developments within the policy discourse, which had been determined by a ‘low return frame” (The Riester pension plans are not worth it, they are unprofitable). Until 2008, the reference to return supported the Riester pension. From 2008 to 2011, negative and positive statements were in balance. Since 2012, however, the opinion has prevailed that Riester is not worth it (Fig. 5.5).

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Fig. 5.5  High versus low return statements (Die Welt, SZ) from 2005 to 2016

The growing emphasis on the low economic efficiency of the Riester pension plans is that the European Central Bank (ECB) low-interest rate policy is by no means a cornerstone of the low return frame. Although the stagnation of the Riester welfare market followed the decrease of interest rates, the discourse did not use the argument of low interest rates for the negative evaluation of the Riester pension plans. There is only a coincidence of number of concluded Riester contracts, interest rate development, and policy discourse. Since the critics did not assume that the low interest rates would maintain for a very long time, the current interest rates did not play a core role for the assessment of a product with a term of over 30 years. Instead, the focus of the criticism has been on the poor conditions of the Riester pension plans: high acquisition costs, downstream taxation, unfavourable mortality tables, and the obligation to pay exactly 4 percent of earned income in order to receive state subsidies. The use of consumer-unfriendly mortality tables renders Riester

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pensions financially attractive only when the insured person enjoys a very long life. The decision to buy a Riester product is therefore a bet on extreme individual longevity. However, instability due to fluctuating interest rates and stock market developments has been hardly discussed. A more fundamental discussion about the appropriateness of additional private pension plans which should compensate for the cuts in public pensions only developed in 2016 (Fig. 5.6). To make the picture complete, the research on positive and negative statements about the Riester pension used six different types of arguments: group-specific arguments, return/efficiency, security/stability, private versus public, regulation/consumer protection, and general/other. While group-specific arguments have been used in the entire period from 2005 to 2016 to show that Riester pensions are profitable for all citizens, low-income persons, married couples, self-employed, younger and older persons, and so on, the social selectivity of Riester pension plans has emerged as an issue in the public since 2008, but on a low level.

Fig. 5.6  Three types of criticism (Die Welt, SZ) from 2005 to 2016

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However, social inequalities in the enrolments in Riester plans are obvious (Bundesregierung 2014b). Women without income and men with an annual income above 65,000 euros are the largest groups of beneficiaries. Other studies on the social distribution of Riester products have shown that the participation of low-income groups is below average (Schröder 2011) (Figs. 5.7 and 5.8). Only 6.4 million people received a Riester allowance in 2011. This is slightly more than 18 percent of the eligible persons. Nevertheless, in its official pension reports, the federal government calculated the future pension level under the assumption that the entire population would have a Riester pension (Bundesregierung 2014a). A further element of the hegemony of the negative image of the Riester products is arguments about the poor consumer protection. The lack of transparency about Riester products significantly explains the public spread of the failure frame. The providers make use of mortality tables with company-specific

Fig. 5.7  Distribution of all positive statements from 2005 to 2016 (Die Welt, SZ)

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Fig. 5.8  Distribution of all negative statements from 2005 to 2016 (Die Welt, SZ)

applications, so-called safety margins, which are not available to the public. According to the mortality table of the German Actuarial Association, the so-called ‘DAV2004R’, a life expectancy of 98 years is estimated for persons who make contributions to their Riester pension plans up to the age of 67 (Gasche et al. 2013, p. 21). The ambiguity of providers’ administrative costs and investment strategies are further examples of the lack of transparency of Riester pension products. Anyone who is sceptical of or expresses criticism towards one or more of these points will contribute to the image of a problematic welfare market. Especially when we compare the actual situation to the federal government’s original objectives, some variant of the failure frame becomes manifest. To sum up, discourses and interest rate development coincide in the direction of a stagnation of the welfare market. The legislative activities of the government in favour of an expansion of the Riester market could not counteract these trends. The policy discourse did not reflect the economic

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developments, but acted as an independent factor. To analyse discursive change is therefore an essential part of any explanation of the dynamics of welfare markets and social policy (Nullmeier 2018a).

5.6 T  he Political Adherence to a Failed Welfare Market From the perspective of a rational model of behaviour, a political project that did not achieve the desired objectives should be terminated. Abandoning the Riester pension policy and the idea of an expanding welfare market for private pension schemes would seem in order. But within a rational-choice paradigm, an argument for adherence to Riester legislation is given: termination is simply too costly. The simplest and most plausible explanation for the continuation of Riester pension policy is therefore a rational choice interpretation of path dependency. However, path dependency explains adherence to a policy by providing cost calculations that the actors involved in the welfare market have made against the backdrop of different scenarios. The path dependency of the Riester market and legislation should be studied in greater detail (cf. Brosig 2014). Before the cost of the deviation from the adopted path can be calculated, it is necessary to know which alternative paths are conceivable. The Riester pension can be stabilized by 1. financial instruments on the demand side: improved monetary incentives, for example, an increase in allowances or tax credits, 2. regulatory instruments: new legislation, which places higher demands on providers to make their financial products transparent and offer corresponding information to consumers, 3. regulatory instruments: an improved framework that favours the providers of Riester products, for example, consumer-policy deregulation, or 4. the creation of a publicly licensed provider of a transparent Riester product, what one might call a ‘basic’ product, or transformed by 5. introducing a legal obligation to enrol in Riester pension plans, or 6. the announcement of the termination of the Riester market.

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The first three options do not depart from the Riester path. The second option has already been chosen several times over the course of Riester legislation. In response to improved consumer-friendly regulations, private financial service providers have reacted by following evasive strategies. The fourth option is consumer-oriented as well, which implies that private providers cannot necessarily be induced by political regulation alone to create beneficial and transparent structures for consumers, and therefore a public-law solution is required. This option demands the establishment of a neutral institution under public law. Calls for a ‘basic’ Riester product (called a DRV-Vorsorgekonto) proceed exactly in this direction (Zimmermann 2012, Tuchscherer 2012; Maisch and Schick 2014). Consumer-oriented regulations can be best implemented if there is an exemplary product that is transparently managed in all respects. Instead of intricate regulation of the private sector, policy has to constitute a public product that in terms of cost structure, investment strategies, and mortality calculation is designed to be transparent and in line with the requirements of a strong consumer protection policy. However, what this provider might look like is largely unclear. At the end of 2016, the social-democratic led Federal Ministry of Labour and Social Affairs presented a comprehensive plan for future pension policy that negates the idea of such a new institution. A compulsory private pension scheme (option 5) would be a remarkable political step. On the one hand, the previous level of benefits could probably be reached through the combination of the statutory GRV system and a compulsory private pension scheme. On the other hand, the burden of justifying a second compulsory system would be very high. The argument that an improvement of the GRV system would be a more appropriate and more profitable way for most citizens is a convincing one, particularly when interest rates are low. A compulsory Riester pension scheme would apply to persons who are already enrolled in a Riester plan as well as to low-income households. The pension these persons could claim from the GRV in combination with a compulsory third pillar would not exceed the level of social assistance benefits. Doubling the obligation to obtain insurance would not improve their economic situation—neither in the savings phase nor in the pay-out phase. Nevertheless, a compulsory insurance scheme would promote the Riester welfare

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market. But the obligation would fundamentally change the character of this market. Therefore, option 5 cannot be considered a path-dependent solution. A sixth option, the termination of the Riester subsidy for new enrolments, has not received serious or sustained public debate. Obviously, this termination would include the continuation of the subsidization of old contracts as a state responsibility. The corresponding market would be closed and abandoned, but the entire process of shrinking the welfare market to the point of disappearance might take up to 80  years. The wider political experiment would be declared a failure. This option is undoubtedly a deviation from the previous path of policy development. The public expenditures required for the alternatives that remain within the Riester path are rather low. A substantial improvement in the public support would not be problematic in view of the previous volume of 3.66 billion euros, especially when compared with the state subsidies for the GRV. The expenditures needed for the establishment of a new provider for a basic Riester product under public law are less easy to calculate, but the new provider could pass the costs of its own institutionalization on to consumers. The costs of the alternatives deviating from the path are significantly higher. However, in the case of a compulsory Riester pension scheme, the state financial burden would be not intolerable (option 5). The number of Riester enrolments could be expected to more than double along with the public expenditures for subsidies. Alternatively, a termination of the Riester market (option 6) would mean declining costs, yet the subsidies for the old contracts would have to be paid for a very long time. Yet, the financial risks for either of these options are not prohibitive. Instead, legitimation costs are more likely to make a deviation from the policy path difficult (Brettschneider 2012). In both alternatives deviating from the Riester path, the central legitimating figure of the three-pillar system would be compromised, and a new narrative for the entire old-age policy would be required in order to justify such political interventions. The current low-interest rates period might function as an argument justifying the necessity of changes to the third pillar. However, addressing the disadvantages of funded pension schemes would also compromise the second pillar. Consequently, a new pension policy would have to

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concentrate on the pay-as-you-go system of the first pillar, in which the financial burdens for improvements are exorbitantly higher than in the other two pillars due to the degree of inclusiveness of this system. In the end, the legitimation conditions might generate higher financial burdens for the government. In spite of the limited appeal and the legitimation effects of the path deviating alternatives, under which particular conditions could fundamental political interventions be realized? Economic developments should be considered first. The biggest challenge for the continuation of the welfare market would be inflationary tendencies. Since the Riester plans contain no price adjustment clauses, the consumer is a potential victim of even moderate inflation. A disparity between interest rate and price increases could be perceived as a real threat for Riester plans and a potential trigger of political intervention. Given a constant interest rate, an increase in inflation has a direct effect on the expected benefits from the Riester plans. Growing inflation decreases the appeal and financial value of the state subsidy. Exiting from Riester plans thus becomes a rational option. If this kind of a macroeconomic development were to continue over a period of several years, Riester pension plans would become a financial burden for both consumers and political actors. In the political realm, the question would arise as to whether consumers can be left to face these economic challenges on their own. The option of a compulsory Riester pension scheme is, however, completely out of the question when there are higher degrees of price inflation. At the same time, the termination of the welfare market with favourable continuation rules for old contracts might become a politically achievable option. The transfer of Riester contributions to the GRV system might be discussed as a version of option 6. During the ongoing low-interest phase that began in 2009, price increases of 2 percent took place in 2011 and 2012; since then, the inflation rate has fallen even further. Although a gradual depreciation of savings had already been the subject of some public debate, the parallel development of low interest rates and inflation rates over several years diminished the intensity of public debates on the subject. The appeal and cost-effectiveness of alternative political options suggest that a fundamental policy change is rather unlikely without a corresponding change in the relevant macroeconomic variables.

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5.7 Summary The developments in German pension politics are striking. The attempt to establish a strong third pillar of state-subsidized private pension provision has failed, and along with it, the welfare market it created has failed. Politics could not compensate for the lack of dynamism in the Riester plan enrolments. The number of concluded contracts remains static. Low interest rates as an economic factor and the negative image evident in the policy discourse are countering efforts to restart reforms of the Riester pension policy. Nevertheless, political actors do not want to terminate the political experiment of a state-subsidized third pillar. Only if economic developments, especially inflationary tendencies, exert even more pressure will the dream/nightmare of a strong third pillar in Germany come to an end.

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6 The Role of Evidence and Commissions in the Dynamics of German and Swedish Pension Markets Stephan Köppe

6.1 Introduction Private pension arrangements are around longer than public pension systems and have gone through numerous changes over the decades. Politicians have created, intervened and disrupted pension markets to varying degrees, in particular in liberal welfare states with a strong legacy of private and occupational pensions. Yet, most of the scholars focus on the major reforms of market creation and policy changes that altered the existing schemes paradigmatically. Following Nullmeier’s detailed account of the German pension reform discourse (Nullmeier, Chap. 5), this chapter aims to gain insights into the piecemeal re-regulation of pension markets in Germany and Sweden after their implementation and the role of data and commissions, and to contribute more generally to the literature on institutional change and the politics of re-regulation.

S. Köppe (*) University College Dublin, Dublin, Ireland e-mail: [email protected] © The Author(s) 2021 C. Ledoux et al. (eds.), The Dynamics of Welfare Markets, Work and Welfare in Europe, https://doi.org/10.1007/978-3-030-56623-4_6

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First, this chapter seeks to map the institutional piecemeal changes after welfare markets are introduced. Based on Streeck and Thelen (2005), the observed changes are not only categorised, but also the agency behind the changes is considered. Second, the scholarly debate on re-regulation has contributed to the understanding of increased regulatory intervention after the introduction of new policies. Yet, the literature has a strong focus on utilities and general consumer market regulation, while our emphasis is on the welfare state with different actors, institutions and ideas shaping market regulation (Leisering 2011). This chapter discusses two structural factors that shape reforms: (a) data availability in the context of evidence-based policy-making and (b) policy commissions. Considering these strands of literature, this paper addresses two main questions. First, which policy changes were implemented following the market creation? According to the analytical framework of this volume (Ledoux et  al., Chap. 1), the policy dynamics are mapped by policy instruments (financial, regulatory, information) and types of incremental change (displacement, layering, drift, conversion) (Streeck and Thelen 2005). What explains the changes and do the subsequent dynamics follow the same pattern as those of the initial policies introduced? The focus will be on two issues. First, the availability and usage of information about market outcomes. This links in particular to the policy instrument of information, but goes beyond that by looking at how data is gathered and used to inform policy decisions. Second, the role of commissions is compared. Expert and partisan commissions had very different roles in Germany and Sweden and the question is how these different paths of market creation also feature in the market dynamics. In order to answer these questions, this chapter compares two Bismarckian pension systems, Germany and Sweden, that implemented private pension on top of the earnings-related schemes around the same time. In the late 1990s, Germany’s pension system was the undisputed archetype of Bismarckian contribution-based entitlements without a basic pension or a strong private pillar. Although Sweden’s welfare state is attributed to the social democratic prototype of universal benefits based on individual entitlements, the earnings-related pension morphed the Swedish pension system into a Bismarckian social insurance system

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underpinned by a strong basic pension (Bonoli 2003). By the early 1990s, both pension systems faced similar challenges of generous Pay-as-you-go (PAYG) pension systems in a time of demographic ageing and modest economic growth. To understand the dynamics of welfare markets, the timing of reforms is crucial. In these two cases, both countries introduced private pensions around the same time. Despite a longer policy-making process in Sweden, the full policy implementation occurred almost simultaneously (Swedish premium pension 2000, German Riester pension 2002). Both schemes added funded pension schemes to their PAYG schemes and brought choice into a one-size fits all system. Despite key differences between the two schemes, the starting point is relatively similar and ideal for studying the dynamics of two pension markets. While contributing empirically to an in-depth understanding of reform dynamics in two welfare markets, this comparative chapter also aims to contribute to the theory development of welfare market dynamics and identifies factors, which require further comparative and quantitative investigations. Section 6.2 provides an overview about the literature and on this basis, poses research questions for studying the dynamics of welfare markets. Section 6.3 describes the policy dynamics in both countries. Considering Nullmeier’s previous detailed account of the German private pension system (Nullmeier, Chap. 5), the German policy description will be more condensed than the Swedish presentation. The analysis in Sect. 6.4 focuses on the influence of data structure and political institutions on pension market dynamics, while the conclusion discusses the wider contributions and how an analytical focus on actors (i.e. parties, organised labour, providers and civil society) would complement our understanding of the welfare market dynamics.

6.2 State-of-the-Art This section reviews briefly the key literature on evidence-based policy-­ making, highlighting the role of commissions, and identifies the factors, which might explain the occurrence, frequency and depth of policy dynamics in the German and Swedish reforms.

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6.2.1 Evidence-Based Policy-Making Within studies of the policy cycle, policy-making and the creation of new policies receives traditionally more attention than policy evaluation. Yet, in order to understand the dynamics of welfare markets policy, policy evaluation is a key jigsaw piece to understand re-regulation and the implementation of amendments. Alongside the United States and Canada, Sweden and Germany are regarded as pioneers of evidence-based policy-making in the 1970s (Knill and Tosun 2012, p. 194). While early scholars assumed an idealised rational approach to policy-making and direct knowledge transfer between academics and policy-makers, the growing body of the literature rather emphasises the shortcomings and barriers to transfer scientific knowledge into policy (Smith and Haux 2017; Cairney 2015). The focus here is on the attention given to the availability of data and information. The first aspect to consider is the availability of data, that is, administrative records, survey observations or qualitative interviews. In the area of private pension markets, data on user behaviour such as coverage, contributions and accumulated assets is often administered and held by private companies. Public authorities might only have sketchy administrative data on tax subsidies, in particular about the socio-demographic breakdown of recipients, compared to recipients of direct transfer payments (Howard 1993). Hence, we would assume better data availability about user behaviour in the pension markets triggers more policy changes. In any market design, we can expect unintended behaviour. Rarely are incentives and the regulation of welfare markets designed perfectly to achieve the desired policy outcomes, for instance, adequate pension coverage and benefits. Yet, policy-makers can only address potential policy shortcomings if these outcomes are monitored. Hence, readily available data on pension savers enables the public and policy-makers to identify potential policy problems and demand policy change. The more data is available, the more changes would be observed. On the contrary, if little information about pension savers is available, the more likely outcome would be policy drift.

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Second, the hierarchy of evidence thesis suggests that randomised controlled trials (RCT) and systematic reviews are valued most (Cairney 2015). For instance, RCTs in behavioural economics have largely influenced debates around auto-enrolment (Thaler and Benartzi 2004). This means it is not just the availability of data, but also the quality of data. The more robust and detailed the data on the welfare market performance, the more policy-makers can identify fundamental market problems and the more policy instruments would change. For instance, a more detailed account of gender inequalities in these new markets, could lead to policy change that aims to mitigate the observed gender discrimination. More robust findings would also increase the likelihood of policy conversion and layering. When the policy evaluation indicates shortcomings, policy conversion would aim to address the inherent policy problems. Layering would be a suboptimal response as it would only shift the problem gradually from the old policy to the new policy layer. Third, research has also shown how shortcomings and blatant errors of welfare providers, public or private, can create public outrage (Radha and Camasso 2013). When such issues around service delivery are reported in the media and a major public scandal unfolds, policy-makers implement rapid, but cosmetic, policy change. Paradoxically, this only occurs when malpractice on the part of welfare providers comes to light, that does not affect structural or systemic injustices related to the institutional design. In the context of pension markets, it means that if malpractice on the part of pension insurers, fund managers or banks are revealed, rapid and cosmetic policy change will occur. This cosmetic policy change would happen on the level of settings and instruments, but does not change the policy goals. Yet, no change will follow if, for instance, systemic inequalities are revealed, such as benefits gained by higher income earners from tax breaks. Scandals might also change reporting practices, since these only come to light through investigative journalism or whistleblowing. Scandals are inherently an issue of data availability and quality, as malpractices would be very risky for providers if data would have to be shared. In sum, one would expect more frequent policy changes if data on private pension policy holders and their saving behaviour is easily available and of high quality. The number of scandals around the new policy would also increase the frequency of reforms.

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6.2.2 Government Commissions Government and policy commissions have a very different tradition within the policy process in Germany and Sweden. In Sweden, state commissions are a central feature of the normal administrative policy-making process, while they are used more sporadically and as a strategic political tool in Germany. According to Marier (2009), German commissions have a mandate from government to study a policy or programme with the aim of understanding policy problems and recommending solutions. The reported findings are consultative, and the government has full autonomy to ignore, reject, alter or implement any of the commission’s recommendations. Swedish government commissions (statens offentliga utredningar— SOU) play a central role as fact finding missions. After defining policy goals, the government mandates an expert commission to synthesise and assess the given knowledge and evidence about the policy area and suggest policy recommendations that can be set into practice (Lindvall and Rothstein 2006). In sum, the main purpose of Swedish commissions is to generate credible ideas for policy solutions. In the German political process, commissions are not an integral part of the policy-making process. Hence, several functions have been associated with commissions as agenda setters and knowledge generators (Fleckenstein 2013), in overcoming institutional gridlock by breaking down established epistemic communities (Marier 2008) and opening windows of opportunities (Fleckenstein 2013) or bypassing vested interest of unions in corporatist arrangements (Lindén 2013; Schulze and Jochem 2007). Despite these differences between the political systems, in the context of pension politics, commissions have the benefit of creating space for long-term and consensual policy solutions in Germany and Sweden. Due to their composition, deliberative policy-making, ability to seek expert advice and openness to public hearings, commissions can create a policy consensus that lasts for decades. Considering that pension politics require long-term legitimacy of intergenerational transfers, commissions are an ideal tool to find such a compromise.

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The main academic debate on commissions is concerned with their influence on policy design and implementation (Marier 2009; Lindén 2013; Leisering 2011). This chapter focuses more on the frequency and depth of policy change, not discussed in the literature so far. First, as highlighted above, commissions have very different goals in both countries. Therefore, the actual mandate of commissions will shape the dynamics of welfare markets. Commissions with a reform mandate will generate more paradigmatic policy change (Hall 1993) and policy conversion (Streeck and Thelen 2005). Moreover, commission may have the goal to ensure long-term stability to preserve the overall welfare market with incremental reforms (Streeck and Thelen 2005). Second, the dynamic of welfare markets would increase with the activity of commissions. Commissions can be used politically to delay a reform process (Knill and Tosun 2012), but eventually some reform would occur. Therefore, the number of policy changes would increase with the number of commissions. The more commissions, the more change. Third, the literature indicates that the composition of committee members is a highly political process (Lindén 2013; Schulze and Jochem 2007). A key in the selection process is to exclude potential veto players who might oppose a certain reform path. Smaller commissions have also the advantage of being less diverse, meaning minority votes are less likely. Lindén (2013) has also argued that academics or other non-political experts are selected as a blame avoidance tactic. A more selective and academic commission composition leads to more change. In brief, one would expect more dynamic welfare markets if there are numerous commissions. However, such policy changes also depend on the mandate and composition. For instance, a mandate for change would facilitate more re-regulation than a mandate for stability.

6.3 Dynamics of Pension Markets The two major pension reforms in both countries created a new layer of welfare markets alongside the retrenchment in the public earnings-related schemes. Considering the scale of the reforms, the layering of these new welfare markets on top of the existing PAYG schemes was paradigmatic

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(Hall 1993). Each section summarises the main market features in Germany and Sweden at the point of inception in the early 2000s and describes all subsequent changes to the welfare market design and policies until 2018. Overall, the welfare markets had been cemented during the observation period as the basic market structure remained intact. Nevertheless, in Sweden, we can observe a conversion of some market features, while Germany is characterised by drift.

6.3.1 Germany Private pensions in Germany, in particular occupational pensions, have a long history, albeit these had limited scope and covered about 15–20% of the population. For most employees, occupational pensions were a modest top-up to the main earnings-related public pension. Private pensions were only relevant for a few self-employed professions (Ebbinghaus et al. 2011). Although the Riester reform fell short of making the private pension mandatory in 2002, it sent a clear signal via tax incentives and concerted information campaigns that all employees should invest in a Riester pension to maintain their standard of living in old age as the public earnings-related pension would be insufficient to provide the hitherto generous benefits. The key features of the new Riester pension at its inception in 2001 are summarised in Table 5.2 in Nullmeier (Chap. 5). These design features already point to some of the emerging shortcomings and inequalities in the following years. First, at that time, the knowledge about the unequal take-up of voluntary pension schemes was not as widespread as nowadays following the auto-enrolment debates in the late 2000s (Thaler and Sunstein 2009). Yet, certainly among pension experts, it was clear that the voluntary Riester pension would lead to lower coverage among low-­ income earners, women and part-time workers. Second, there were little vesting rights to change providers after the original sign-up. For instance, administration fees had to be paid upfront and penalties for changing contracts were not regulated. Third, the financial incentives were fixed and depreciated in value over time without political intervention or indexing. Fourth, a further shortcoming was the lack of a centralised data

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register to monitor take-up and savings behaviour. While the public pension administration (DRV) maintains a record of all new contracts, there is a lack of information on non-contribution periods and contract terminations. So while policy-makers recorded a massive initial buzz and increased uptake, it remained unclear how many of the older contracts were still active by the end of 2010 (Blank 2011). Following the introduction of the Riester pension, several changes were implemented, summarised in Table  6.1, which addressed some shortcomings. First, due to a lack of indexation, there is a strong indication for policy drift in the financial dimension. In irregular intervals, the flat rate allowances were increased, but below the inflation rate (Blank 2016). Moreover, Table 6.1   Reforms of the German Riester pension Year (law) 2005 (AltEinkG 2004)

Financial

Regulatory

Information

Basic pension (Rürup pension, Basisrente), lump sum share decreased to 30% (previously 40%) Unisex tariffs

2006 (AltEinkG 2004) Home subsidy account 2008 Child allowance €300 (Wohnförderkonto) (EigRentG) (prev. €185); extra one-off allowance (€200) if contract before 25th birthday; removal of fixed capital amounts for mortgage deposits (Wohnriester) 2010 Cross-border mobility within EU 2013 Vesting rights (max €150 fee, new provider admin fees only on 50% of capital) 2018 Basic allowance increased to €175 (prev. €154) Source: Author’s summary based on Leisering (2011), and Blank (2016)

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German life insurers, who also sell Riester pensions, were required to offer a guaranteed return. The discount rate declined from 3.25 to 0.9 in the period 2002 to 2017. Thus, since its introduction, the Riester pension became less attractive for younger cohorts, while early adopters benefitted from higher guarantees. Second, regulatory reforms had two aims. Some changes strengthened consumer rights and the social insurance function, while layering added new schemes within the individual pension market. Regarding increased consumer rights, the possible lump sum at the end of the saving period had been decreased from 40% to 30% of the accrued assets, strengthening the insurance function (Berner 2011). The original Riester scheme penalised cross-border workers. The 2010 reform regulated the pension portability within the EU, while non-EU migration continues to incur penalties. Previously, the allowances and tax deductions would have to be refunded to the treasury. With the reform, the Riester pension could be claimed in all EU/EEA countries. Moreover, EU citizens who live outside of Germany, but are employed in Germany became eligible to claim the Riester allowances. Vesting rights were poorly developed in the original Riester pension as administration charges were paid in the first five years, and would have to be paid again, when changing a contract. With the 2013 reform, termination charges had been limited to €150 and the new provider could charge administration fees only up to 50% of the transferred capital. All these changes of the Riester instruments addressed some shortcomings of the original market design without changing the overall policy goals. One exception was the introduction of the unisex tariffs in 2006. Following an EU directive to achieve more gender equality, all insurers were obliged to end gender discrimination in their calculation of premiums and benefits, which affected not only pension insurance but also the entire insurance market. Layering occurred through introducing extra savings schemes for self-­ employed and to include mortgages. The original Riester pension was designed for employees and civil servants, but did not address the savings schemes for the self-employed nor alternative pension savings through homeownership.

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The higher private retirement contribution rate of the self-employed, who had used life insurance policies in the past to save for retirement, was not adequately replaced by Riester pensions. On top if this, the tax incentives for the traditional life insurance policies were phased out with the introduction of the Riester pension. Hence, the basic pension was introduced in 2005 for self-employed (later called Rürup pension). In essence, a target of tax-free contributions of €20,000 per annum enabled the self-­ employed, in particular, higher income earners, to save more for retirement than with the Riester pension. In 2015, the €20,000 threshold was indexed and has been increasing with the contribution ceiling in the public pension scheme. The basic pension has been modelled more or less after the Riester pension, but there is no lump sum option. In other words, the basic pension has strengthened the compulsory annuity even more. Although renting had been much more common in Germany, the original Riester pension allowed withdrawals of €10,000–50,000 as deposits for purchasing owner-occupied property. The nominal capital had to be repaid into the Riester savings account until retirement age, which meant that Riester savers received an interest-free credit on their own savings. The 2008 reform increased flexibility by enabling withdrawal of all capital or keeping 25% in the account. Instead of fixed capital thresholds, it also benefited savers who had relatively little capital in their accounts. The new law also broadened the savings and mortgage options as well as simplifying the deferred taxation (BMVBS 2013). Compared to the original interest-free withdrawal, a new home subsidy account (Wohnförderkonto) simulated interest earned on the deposit and is subject to income tax at retirement until the age of 85. However, savers can reduce their tax liability by regular or lump sum repayments as they would do with a mortgage (for details, see BMVBS 2013). Using the owner-occupied home as a net pension was integrated at the inception of the Riester pension, but only the subsequent reform increased flexibility and streamlined deferred taxation. In sum, the German pension market development involved several irregular changes to rates and thresholds as well as regulatory layering. The allowances and thresholds were adjusted in irregular intervals, since indexing is absent in the Riester pension and was only introduced for the

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Rürup pension contribution ceiling. Regulatory layering occurred in several instances through the diversification of available products for the self-employed (Rürup) and homeowners (Wohnriester). Welfare market dynamics also included new rights around vesting and cross-border mobility, without affecting the overall aims of the voluntary private pension market. Some of the key problems that contribute to what Nullmeier (Chap. 5) refers to as the failure discourse had not been addressed, indicating a policy drift. So far, the stagnation of take-up and low coverage overall of Riester pensions had not been addressed, for example, by adjusting incentives, introducing auto-enrolment or mandatory enrolment. Furthermore, the already mentioned lack of indexing allowances and tax rates made voluntary saving less attractive over time.

6.3.2 Sweden Compared to the German reform, the Swedish reform had a very long policy design and implementation process. The first reform commission convened in 1991 and the main pillars of the reform, including the added private pension, had been presented in 1993. Based on these strategic decisions, employees already began to contribute into a private, but state-­ managed, pension fund from 1995, until a new welfare market for premium pensions was fully implemented in 2000. The main features of the premium pension are summarised in Table  6.2 (Köppe 2015; J. Palme 2003): Following the introduction of the premium pension, the first key change happened without legislative reform. As it became clear that emerging negative effects (low performance, inequality) could be attributed to poor investment decisions, the Premium Pension Authority (PPM) changed its information strategy by ceasing to encourage choice actively for all and instead targeting communication to those with larger sums in their default fund. The first legislative change came in 2010 (see Table 6.3) and mainly involved regulatory changes to the administration and choice architecture, leaving other dimensions (largely) untouched. Some of the issues

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Table 6.2   Swedish pension market in 2000 Financial

Regulatory

Information

2.3% contribution of gross incomea Administration fees are charged by the funds and changing fees are pooled 30% lump sum option Savers can opt for spousal benefits and splitting of benefits based on actuarial rules

All savers were Mandatory encouraged to state agency make an active (Premiepensionsmyndigheten— choice PPM) administers accounts (campaigning, The public default fund (National individual letters) Savings Fund – Premiesparfonden) provides a low/medium risk profile PPM publishes key performance for all savers indicators of all After an initial choice, savers cannot available funds return to the default fund, but Savers receive an could opt for the higher risk annual letter on premium choice fund fund performance (Premievalfonden) Savers can invest in a maximum of five pension funds Fund managers can register up to 25 funds and consortia (förvaltargrupp) can register up to 50 funds

Source: Author’s own summary The usually reported figure of 2.5% refers to the pensionable income, while the gross income measure aligns more with international practice (Köppe 2015, p. 260)

a

addressed were naive investing, non-choice and day trading (Cronqvist and Thaler 2004; M. Palme et al. 2007; Weaver 2005). The number of funds each fund manager could offer had been limited from the start, but the thresholds were tightened. If fund managers formed consortia, they could offer more than the limit of 25 funds. The reform however, included consortia in the maximum threshold. Nonetheless, between 2000 and 2008, the number of funds increased from about 500 to 800 (Köppe 2015). By 2019, however, the number has decreased to 468 (own calculations based on PM 2019). Moreover, the merger of the previously independent PPM with the Pension Agency (Pensionsmyndigheten) followed the model of a one-stop-­ shop for public services where users can get all information from one point of contact (for a similar example of labour market policies, see Köppe and MacCarthaigh 2019).

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Table 6.3   Reforms of the Swedish premium pension Year (law)

Financial

Regulatory

2007

2010 (Prop. 2008/09:202; Prop. 2009/10:44)

2018 (Prop. 2017/18:247)

Information PPM-targeted communication to change funds

Enable return to Balance age associated risks default fund Fees for changing with lifecycle funds to achieve funds (Sofa), fairer burden of risk protection costs PPM merged with public pension agency Max number of funds per provider limited to 25 (including consortia) PPM approves management fees, managers cannot receive commission, ban of telephone marketing

Source: Author’s summary based on Köppe (2015), Prop. (2008/09:202), Prop. (2009/10:44), Prop. (2017/18:247) and Dir. (2018:57)

Following scandals around overcharging premium pension savers, the regulatory requirements were tightened in 2018 (Prop. 2017/18:247). Fund managers are now required to have a minimum of three years of experience and a minimum investment in other pension markets. The main change with a social policy implication was that managers were no longer allowed to receive commissions for brokering a pension fund. Moreover, the pension agency was put in charge of approving management fees. Finally, existing regulations limiting telephone marketing of premium pension funds (e.g. Prop. 2013/14:71) were replaced with a ban on telephone marketing. Many of these measures were already part of general consumer protection laws in the insurance industry and were made only slightly stricter in the premium pension market.

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More important and far reaching were regulatory changes to the choice architecture, specifically the return to the default fund, switching fees and lifecycle funds. Originally, savers could not return to the Premium Savings Fund once they chose a private fund and the state only offered a slightly riskier Premium Choice Fund as a subsequent public option. In other words, once savers made a choice, they could only opt for a larger share of equities with the Premium Choice Fund, but not a safe low-risk alternative within the state-managed funds. This also inhibited active choice as savers were not choosing at all, fearing that they could not return to a low-­ risk public fund. Overall, the reform increased existing options and confirmed the original principle to offer ‘more flexibility and choice’ (SOU 1994:20: 212) compared to the public pillar. Additionally, the introduction of fees for portfolio changes limited choice options. The introduction of transaction costs for each change to the individual portfolio added a price tag to exercising choice and, thus, eliminated cost-free changes. Free changes for individuals had created a classic free-rider problem as a few regular—some of them daily—traders benefitted from free changes, while the costs were born by all savers. The introduction of transaction fees strengthened the actuarial principles of individual pension insurances and mimicked their fee structures more closely. Only the new default lifecycle fund profoundly altered the state’s responsibility for investment risks, providing evidence of a policy conversion process. Although the aforementioned two principles of choice and actuarial benefit were clearly set out between 1992 (Ds 1992:89) and 1994 (SOU 1994:20), the details of the premium pension were worked out later (Köppe 2015: 275–277; Prop. 1999/2000:12; Prop. 1997/98:151). The state-managed Premium Savings Fund for non-­ choosers was the result of a cross-party compromise in 1997 (Prop. 1997/98:151). In the end, the social democrats put their weight behind the default fund, while the liberal parties achieved their goal of having individual pension funds remaining relatively unregulated. Finally, the option to return to a state-managed fund after having actively managed the pension portfolio was only included at the very end of the reform packages in 1999. During this negotiation process, lifecycle funds had

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been discussed, but were rejected for two reasons (Prop. 1999/2000:12: 18). First, the government argued that in the short term the potential loss for the new pension savers was relatively small. At the start, the savers would still be far away from retirement and not exposed to the market volatility. Second, it was feared that the management of lifecycle funds would be an ‘inappropriate burden’ for the new and inexperienced premium pension agency. Although lifecycle funds were discussed in policy circles, they were clearly rejected politically. Yet, resistance to stronger state intervention and risk coverage eroded in the following decade. Already in 2005, the first evaluations showed that few savers exercised their choice (SOU 2005:87) and lifecycle funds were introduced after all as a means to protect older savers against market volatility. The new policy instrument lifecycle funds strengthened social protection within the welfare market by protecting savers from market volatility, effectively converting the original market goal to one of social protection.

6.3.3 Comparison Despite similar starting points, the subsequent reform paths diverged in Germany and Sweden in four key ways during the observation period 2002–2018. First, regime and policy differences matter. Sweden applied unisex life tables right from the start (Sundén 2006) and did not have to adjust to the EU directive as did Germany in 2006. This example shows how policy differences explain the necessity to respond to external pressures. Pioneering countries drive international policy developments, in this case more gender equality, while late comers are forced to amend their market regulation accordingly. Second, policy changes were more frequent in Germany. The lack of indexing in the Riester system made regular changes necessary, whereas the automatic increases of the contribution ceilings in the Swedish

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system made changes to the settings almost obsolete. As the premium pension in Sweden is mandatory rather than based on financial incentives, the Swedish welfare market lacked key settings that require indexation as in the German case. Third, the depth of change is low. Most changes occurred incrementally on the level of policy instruments in both countries. Yet, in Germany, we also observed a lot of changes to settings, while the Swedish premium pension switched goals. Hence, despite less frequent changes, Sweden experienced more profound policy change. Fourth, different types of incremental changes occur. Germany is characterised by layering and drift, while Sweden indicates conversion. In Germany, we can observe two layering processes of new schemes to the existing Riester pension, resembling the development of Individual Retirement Accounts in the United States catering to socio-demographic differences (work, age, etc.) (Köppe 2015). The US retirement savings accounts were differentiated for small businesses, taxation regimes (e.g. taxation of contributions instead of benefits) and even non-pension purposes like higher education fees. In the German case however, the additional schemes were aimed at the self-employed and those who save for a mortgage deposit. The German pension system might suggest a further expansion of other peculiar private pension schemes. Moreover, neglecting low take-up, policy cancellations and increasing inequalities in the policy responses indicate a policy drift, and eventually a policy failure discourse (Nullmeier, Chap. 5). Over time, the Swedish pension market converted slowly by incorporating more policy instruments from social insurance schemes and improving consumer rights. The equivalence principle was strengthened by ending the practice of day trading and introducing lifecycle funds as a buffer against market volatility. While originally set up as a jewel of choice in contrast to the default social insurance scheme, the observed conversion limited choice and strengthened risk pooling typically associated with social insurance.

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6.4 D  ata Structure and Political Institutions in the Re-regulation of Welfare Markets: Evidence and Commissions Following the description of the incremental policy change, this section scrutinises the patterns of change derived from the literature in relation to evidence and commissions in the two observed cases.

6.4.1 Evidence and Data In the two cases, the availability of data and evaluations based on this data had a considerable influence on the occurrence and frequency of policy change. Thanks to the central administration of the premium pension accounts, there is plenty of rich and highly accurate administrative data in Sweden. Moreover, researchers’ access to public register data facilitates numerous studies on Sweden’s pension savers. The premium pension agency and the successor agency published key information about portfolio performance and choice behaviour right from the beginning. Furthermore, already five years after the implementation, one of the first public inquiries published a comprehensive review of the effects and outcomes of the reform (SOU 2005:87). In contrast, data about the German Riester pension is relative scarce (Hagen and Reisch 2010). Although the total number of contracts is published regularly (DRV 2009), even the pension agency cannot verify how many of these contracts are active or cancelled. As the contracts are managed by the providers, there is little public information about and access to administrative data on contribution rates, socio-demographic profile and fund performance (see, for instance, GDV 2009). Researchers rely heavily on lower quality survey data to understand coverage and savings rates (Blank 2011; Bode and Wilke 2014; Rieckhoff 2011). This general lack of data becomes obvious in the government’s annual pension reports, where the future benefit calculations are based on a simulation of savings behaviour, rather than reports of actual coverage or savings rates (BMAS 2018).

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We find little evidence, that good data availability triggers more policy changes. Given the early problematisation of fund performance and saving behaviour in Sweden, one would have expected earlier policy change and more frequent adjustments, as these reports are published annually. Moreover, the free availability of the raw data for research purposes should have driven more change. On the contrary, we see many smaller adjustments in Germany, including the introduction of new schemes, in the absence of data. The changes to the Riester pension were less driven by scientific knowledge and more by policy management and political knowledge (Head 2008). According to Head (2008), bureaucrats rely on organisational experience and politicians on knowledge gathered among party members, organised groups and media reports, which are all legitimate information sources, but less reliable and robust compared to sound social research. There is more support for the influence of data quality and scandals. Given the higher quality and depth of data in Sweden, we can observe a policy conversion to address the observed shortcomings in response to in-depth data analysis. Several of the policy changes in 2010 were based on the collected and analysed data. None of the German changes can be attributed to the given data quality, which suggests again less reliance on evidence-based policy-making. Finally, the Swedish Allra scandal in early 2017 revealed several malpractices such as aggressive marketing, high fees and escaping regulatory oversight abroad (SVT 2017). This fuelled the second major overhaul of the premium pension shortly after the scandal broke loose (Prop. 2017/18:247). Interestingly, some of the new instruments go beyond pure cosmetic policy proposals, for instance, banning telephone marketing and tighter control on administration fees. The pension agency gained more power to sanction fund managers, but already had sufficient power to ban Allra from the premium pension market without legislative change. In this respect, the government demonstrated policy action, although the pension agency reacted on the emerging information swiftly. In Germany, Riester pension providers were close to a nationwide scandal when the leading public broadcaster revealed improper selling practices by a financial service provider with close links to the Schröder government in office (ARD 2011). The media attention focussed in the end

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more on the personal networks and lobbying activities than on the institutional or systematic problems with the Riester pension, so that this did not trigger policy change. This suggests also that how scandals are framed affects whether they trigger re-regulation. Considering that only two scandals reached nationwide coverage in the observation period, further in-depth analysis and more cases would be required to understand the effects of scandals on the dynamics of welfare markets.

6.4.2 Pension Commissions At the inception of both pension markets, commissions played different roles (Köppe 2015; Marier 2009; Loxbo 2007). Table 6.4 shows that the Swedish premium pension was strongly influenced by the pension reform commission (PAG) and the subsequent implementation commission (GG). To the contrary, the Blüm commission of 1996 was entirely concerned to preserve the PAYG pension system and had no effect on the later welfare market creation. Both Swedish commissions had a mandate for policy stability, while the German Rürup commission had a mandate for policy change. In Sweden, the key aim of the implementation commission (GG) was to ensure that the cross-party compromise achieved in the pension reform commission would be delivered. Also, the following Pensionsgruppen (PG) was charged with maintaining the current pension system and ensuring its long-term stability. In contrast, the German Rürup commission had the brief to amend and change the existing welfare market (Schulze and Jochem 2007). In so far it is not surprising that the Rürup Table 6.4   Pension commissions in Germany and Sweden Year

1990

Germany Sweden

1995 B

PAG

GG

2000

2005

2010

RÜ

2015 VGV

PG

Sources: (Köppe 2015; Schulze and Jochem 2007) Notes: B Blüm Kommission, RÜ Rürup Kommission, VGV Kommission Verlässlicher Generationenvertrag, PAG Pensionsarbetsgruppen, GG Genomförandegruppen, PG Pensionsgruppen

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commission generated policy change, however this was achieved through layering. Instead of converting the existing scheme to include self-­ employed, a separate sub-market was created. The literature suggested that a reform mandate will generate paradigmatic reforms (Hall 1993) and policy conversion, but it was actually the Swedish PG with a mandate for stability that aimed to protect the premium pension by policy conversion. In this case, policy conversion aligns better with the aim of policy maintenance, while layering and displacement would have undermined the existing market. Furthermore, this comparative case study has insufficient observations to conclude if more commissions lead to more change. However, Table 6.5 shows a count of the Swedish government commissions concerned with the premium pension. There were 11 commissions in total with a mandate to gather knowledge on a particular issue that concerned the premium pension. Overall, these resulted in negligible policy change. Finally, both cases show that composition and size of commissions matters. The members of the German Rürup commission included representatives of trade unions, employer associations and academics. Schulze and Jochem (2007) argue that the academic and non-partisan authority of the Rürup commission was used as a party whip to bring defiant social democratic members of parliament in line with the government position. The academic and technocratic composition was used to legitimate the policy proposals as absolutely necessary. In Sweden, members of the GG and PG were politicians representing all parties that signed up to the cross-party compromise of the PAG in 1991. Hence, all mainstream parties were represented in the Swedish commissions, excluding the radical left (Vänster) and right (NyD, SvD). Such a broad political spectrum would suggest that change is unlikely Table 6.5   Swedish government commissions with a mandate for the premium pension annually, 2000–2018 Years Count

2000 1

2005 1

1

1

2010 1

2

2015 2

1

1

Source: Author’s compilation based on a search for ‘premiepension’ in the archive of the parliament website with counts based on mandates for commissions (Kommitédirektiv). Each column represents one year

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due to the number of partisan veto players. While the Swedish commissions were more diverse and political, they were smaller than the German Rürup commission. The smaller size seems to have facilitated consensus building during the foundation and subsequent reforms alike (Loxbo 2008). At the time of writing, the third German pension commission is still preparing its report (VGV). Yet, a key research problem remains to understand the relationship between the relative rare occurrence of commissions and the frequency of policy changes. While the literature review indicated a strong influence of commissions on reform content, the long-­ term perspective on their cumulative effect on the dynamics of welfare markets requires further studies. Moreover, the positions, interactions and coalitions among actors within these follow-up commissions would provide more insights on their influence on the actual policy design.

6.5 Conclusions This comparative case study revealed the patterns of pension market changes in Sweden and Germany over a 20-year period. Overall, both pension markets are characterised by stability and some incremental changes to regulatory instruments. Layering and drift are observed in the German pension market, while conversion was a feature of the Swedish premium pension. Analytically, the chapter focussed on the availability and quality of data as well as political institutions (commissions) to understand the frequency and types of welfare market changes. Data availability and high-­ quality analysis was a driver for re-regulation and policy conversion, while in the absence of robust data, drift seems more likely. Also scandals fuel rapid policy change, although the effects are more cosmetic (Radha and Camasso 2013). The Swedish case confirms this pattern as the Swedish government gave the impression of reacting to a scandal, while state agencies already had sufficient power to intervene. However, little policy action followed the German mis-selling scandal. The limited and poor-quality data facilitated that the scandal came to nothing as the individual misconduct of one provider could not be linked to a systematic

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market failure and lack of oversight. Future comparative research on market scandals and market failures should consider how data availability influences the ability to uncover such scandals as well as how a robust evidence base facilitates change. Pension commissions played a very different role at the foundation of both pension markets and continued to have different functions during subsequent reforms. The number, composition and mandate of commissions matter, but further similar case studies would be required to identify the mechanisms of change as well as to theorise the role of commissions when reforming existing welfare markets. These two cases have shown that the politics of welfare markets share some similarities during inception and subsequent reforms, but their dynamics are profoundly different as institutional legacies have more weight. Following the privatisation and marketisation reforms of the 1990s and 2000s, we are still at the beginning of understanding the new politics of welfare markets.

References AltEinkG (2004). Gesetz zur Neuordnung der einkommensteuerrechtlichen Behandlung von Altersvorsorgeaufwendungen und Altersbezügen (Alterseinkünftegesetz - AltEinkG). Bundesgesetzblatt Teil I, 33, 1427–1447. ARD. (2011). Fall AWD: Die Chronologie. https://daserste.ndr.de/panorama/ aktuell/Fall-­AWD-­Die-­Chronologie,awd157.html. Accessed 15 May 2019. Berner, F. (2011). New Private Pensions in Germany: A Pension Maret or a Branch of the Welfare State? Contested Regulatory Issues. In L.  Leisering (Ed.), The New Regulatory State. Regulating Pensions in Germany and the UK (pp. 127–149). Houndsmills: Palgrave Macmillan. Blank, F. (2011). Die Riester-Rente – Überblick zum Stand der Forschung und sozialpolitische Bewertung nach zehn Jahren. Sozialer Fortschritt, 60(6), 109–115. Blank, F. (2016). Einstieg in den Ausstieg? – Die Entwicklung der Förderung der „Riester-Rente‟. Sozialer Fortschritt, 65(4), 97–102. BMAS. (2018). Rentenversicherungsbericht 2018. Berlin: Bundesministerium für Arbeit und Soziales.

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Köppe, S. (2015). Wohlfahrtsmärkte. Die Privatisierung von Bildung und Rente in Deutschland, Schweden und den USA. Frankfurt/M: Campus. Köppe, S., & MacCarthaigh, M. (2019). Public Service Integration in Hard Times: Merging Unemployment Benefit and Labour Activation Measures. Administration, 67(2). Leisering, L. (Ed.). (2011). The New Regulatory State. Regulating Pensions in Germany and the UK. Houndsmills: Palgrave Macmillan. Lindén, T.  S. (2013). Pension Policy Recommendations of Governmental Commissions in Norway, Denmark, Germany and the UK. In R. Ervik & T. S. Lindén (Eds.), The Making of Ageing Policy. Theory and Practice in Europe (pp. 98–123). Cheltenham: Edward Elgar. Lindvall, J., & Rothstein, B. (2006). Sweden: The Fall of the Strong State. Scandinavian Political Studies, 29(1), 47–63. Loxbo, K. (2007). Bakom socialdemokraternas beslut. En studie av den politiska förändringens dilemman – från 1950-talets ATP-strid till 1990-talets pensionsuppgörelse. Växjö: Växjö University Press. Loxbo, K. (2008, August). Behind Closed Doors. Why the Swedish Pension Reform Was Successful. Ratio Conference 2008, Stockholm. Marier, P. (2008). Empowering Epistemic Communities: Specialised Politicians, Policy Experts and Policy Reform. West European Politics, 31(3), 513–533. Marier, P. (2009). The Power of Institutionalized Learning: The Uses and Practices of Commissions to Generate Policy Change. Journal of European Public Policy, 16(8), 1204–1223. Palme, J. (2003). Pension Reform in Sweden and the Changing Boundaries between Public and Private. In G. L. Clark & N. Whiteside (Eds.), Pension Security in the 21st Century. Redrawing the Public-Private Debate (pp. 144–167). Oxford: Oxford University Press. Palme, M., Sundén, A., & Söderlind, P. (2007). How Do Individual Accounts Work in the Swedish Pension System? Journal of the European Economic Association, 5(2–3), 636–646. PM. (2019). Lista alla fonder. In Pensionsmyndigheten. Stockholm: Pensionsmyndigheten. Prop. (1997/98:151). Inkomstgrundad ålderspension, m. m. Stockholm: Regeringen. Prop. (1999/2000:12). Statlig förvaltning av premiepensionsmedel, m. m. Stockholm: Regeringen. Prop. (2008/09:202). Pensionsmyndigheten och dess verksamhet. Stockholm: Regeringen.

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Prop. (2009/10:44). Ändringar i premiepensionssystemet. Stockholm: Regeringen. Prop. (2013/14:71). Telefonförsäljning på premiepensionsområdet. Stockholm: Regeringen. Prop. (2017/18:247). Ett tryggt och mer hållbart premiepensionssystem. Stockholm: Regeringen. Radha, J., & Camasso, M. J. (2013). Protecting Children in the Age of Outrage: A New Perspective on Child Protective Services Reform. Oxford: Oxford University Press. Rieckhoff, C. (2011). Wohin steuert die Riester-Rente? – Stand der Forschung, Kritik der Ergebnisse und zukünftiger Forschungsbedarf. Deutsche Rentenversicherung, 65(1), 87–104. Schulze, I., & Jochem, S. (2007). Germany: Beyond Policy Gridlock. In E. M. Immergut, K. M. Anderson, & I. Schulze (Eds.), The Handbook of West European Pension Politics: Political Institutions and Policy Outcomes in Comparative Perspective (pp. 660–710). Oxford: Oxford University Press. Smith, K., & Haux, T. (2017). Evidence-Based Policy-Making (EBPM). In B.  Greve (Ed.), Handbook of Social Policy Evaluation (pp.  141–160). Cheltenham: Edward Elgar. SOU (1994:20). Reformerat pensionssystem. Stockholm: Fritzes. SOU (2005:87). Svårnavigerat? Premiepensionssparande på rätt kurs. Stockholm: Fritzes. Streeck, W., & Thelen, K. (2005). Beyond Continuity: Institutional Change in Advanced Political Economies (Vol. 1). Oxford: Oxford University Press. Sundén, A. (2006). The Swedish Experience with Pension Reform. Oxford Review of Economic Policy, 22(1), 133–148. SVT. (2017). Allra-skandalen – detta har hänt. https://www.svt.se/nyheter/ekonomi/allra-­skandalen-­detta-­har-­hant. Accessed 15 May 2019. Thaler, R.  H., & Benartzi, S. (2004). Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving. Journal of Political Economy, 112(1, part 2), S164–S187. Thaler, R.  H., & Sunstein, C.  R. (2009). Nudge. Improving Decisions About Health, Wealth and Happiness. London: Penguin. Weaver, R. K. (2005). Design and Implementation Issues in Swedish Individual Pension Accounts. Social Security Bulletin, 65(4), 38–56.

Part III The Dynamics on the User Side

7 ‘Disorientation’ in a Capricious Welfare Market: The Case of the German Pension System Ingo Bode and Ralf Lüth

7.1 Introduction In the literature dealing with welfare markets and their outcomes, the experience of users has hitherto received little attention, particularly in the area of private retirement provision. This chapter, exploring recent developments in Germany, starts with the assumption that the regulatory and discursive instruments employed for both the establishment and consolidation of welfare markets have an effect on individual market participants, including personal orientations on and beyond economic agency. In the field of pensions, this agency has an exceptionally long time horizon and is embedded in welfare state contexts that differ internationally. This is why it might be of particular interest to learn about the perspectives of ‘welfare market users’ which one can define as individuals subject to a multi-tiered pension system including both public schemes and funded saving plans operated in a market environment. I. Bode (*) • R. Lüth University of Kassel, Kassel, Germany e-mail: [email protected]; [email protected] © The Author(s) 2021 C. Ledoux et al. (eds.), The Dynamics of Welfare Markets, Work and Welfare in Europe, https://doi.org/10.1007/978-3-030-56623-4_7

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In Germany, a large majority of citizens has long lived with a comparatively generous and secure social insurance scheme, prior to reforms curtailing the latter in a context of progressive financialization (Bode 2008; Ebbinghaus et al. 2011; Hinrichs 2015; Hassel et al. 2019). The current state is one of a ‘new public-private mix’ (Fornero and Wilke 2020) in which part of retirement provision is subject to market regulation rather than direct statutory intervention (Leisering 2011; Fine 2012), and non-­ statutory schemes, fuelled by tax-exemptions of long-term financial investments and direct payments from the public purse into private saving accounts, are meant to provide for social security in later life. Hence, while welfare states continue to cater for retirement provision (if to a varying degree), the organisation of the latter is partly left to market forces and individual decisions under considerable uncertainty. While pension systems have always embraced market-based elements, the advent of what is often labelled ‘pension fund capitalism’ (Clark 2003, pp. 40–46) does make a difference. The international (especially Anglo-Saxon) literature has discussed implications of this movement quite early (see, for instance, Quadagno 1999). In systems featuring a strong private pension pillar, the ‘discerning welfare consumer’ (Mann 2006, pp. 77–78) is expected to develop ‘individualized strategies’ (Estes et al. 2003, p. 78) for retirement planning. Hence, market dynamics matter, notwithstanding the existence of occupational saving plans that can relieve investors from taking individual action on the pension market, and despite the fact that Western pension systems are still infused with the expectation of state interference (Hyde et al. 2006; Leisering 2011; Tuytens 2019)—which is why it has become common to refer to these mixed arrangements as ‘welfare markets’, shaped by policies for human welfare which embed and endorse market activities (of the financial industry). Meanwhile, the advent and spread of such welfare markets has inspired much academic work (see Taylor-Gooby 1999; Nullmeier 2002 or Sanger 2003, for early contributions). In the course of time, scholars have explored the complex dynamics associated with marketisation including

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in comparative perspective (Gilbert 2002; Gingrich 2011; Crespy 2016; in Germany, Willert 2013; Köppe, Chap. 6). Concerning retirement provision, it is sometimes argued that stock-market based pensions and the related financialisation of retirement provision are no longer the first choice of public policy-makers (e.g. Hassel et  al. 2019). However, as things stand now, access to income replacement in old age in the near future will depend on market dynamics much more than ever before, including in the area of occupational pensions (see below). Against this backdrop, insights into how welfare markets impact on users and ‘social policy-takers’ are crucial, in particular when it comes to the mind-sets providing orientation to them. This chapter considers these mind-sets as an outcome of the partial marketisation of the German pension system, engaging with the micro-­ level of such systems and focusing on the users’ subjectivities. This is predicated on the observation of market dynamics and (repeated) regulatory change creating a capricious environment for the organisation of retirement provision (Nullmeier, Chap. 5). Our analysis is based on various empirical findings on the reshuffle of the German pension system starting in the early 2000s.1 The concept used for elucidating perspectives of welfare market users is ‘disorientation’, capturing cognitive, emotional, and political dimensions of human reactions to structural uncertainty in late modern society. In the area under study, such uncertainty connects with both a de-securitised life course and the spread of ‘pension fund capitalism’, as will be discussed in the first part of the chapter. The second section offers a quick foray into the reorganisation of the German pension system, while the third one presents results of our empirical research undertaken over the last years, including a short note on the methodology. The conclusion contains some reflection about the long-term consequences of social protection schemes becoming marketised, including with an eye on political dynamics related to the rise of right-wing populism.

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7.2 Disorientation and the Planning of the Future Disorientation is a concept anchored in social psychology. In essence, this term encapsulates situations in which human beings lose their sense of direction or social position, sometimes in combination with states of deep confusion. It can be applied to various spheres of human life (Martin and Rosello 2016), including to macro phenomena; spatial arrangements of private consumption (Woodward et al. 2000); evolving attitudes during economic crisis (Gaiser et al. 2013); and relational problems following increased social mobility (Daenekindt 2016). As regards developments in Western welfare states, it resonates with observations of uncertainty proliferating in the life course of contemporary citizens (Crouch and Keune 2012), and with studies illuminating how this affects people’s attitudes, political behaviour, and sentiments (Hofmann 2016). It is safe to assume that human beings need orientation to conduct their life and provide the latter with meaning over various stages of their life course. This probably is an ontological fact, notwithstanding that the building of the respective mind-sets is moderated by cultural norms that differ internationally and between social groups. However, internationally, with both ongoing social transformation and policy-driven institutional change, it seems that it has become more difficult to develop such orientation. The coincidence of disrupted professional trajectories, unstable families, and increased difficulties in making the ‘right’ choices in rapidly changing economic, social, and cultural environments is often deemed a ‘stressful’ feature intrinsic to contemporary Western societies where citizens have to live with an insecure life course (Beck and Beck-­ Gernsheim 2002; Bauman 2006) and with difficulties when planning their future (Paskov 2011). This also affects retirement provision (Wilke 2016). As has been argued by economic sociologists (e.g. Beckert and Dequech 2006), the common experience of contemporary citizens is that action geared towards organising the future is based on increasingly fragile assumptions. The planning of later life involves a huge time span and is contingent on dynamics individuals can hardly control, such as personal fate (e.g. failure on the labour market), trends in the economic

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system (e.g. interest rates), and the social behaviour of others (including spouses and relatives). Yet, institutional change matters as well. As we will show below, the welfare state, once meant to contain risks related to the vicissitudes of the life course, contributes to the spread of uncertainty as reforms have made future income provision less predictable, including in Germany. So, if citizens want to protect themselves against the aforementioned vicissitudes; if life is experienced—or at least assumed—to be (more) fluid; and if the environment in which individual planning is situated exhibits opaqueness and volatility, disorientation is likely to occur. Such disorientation has cognitive dimensions. First of all, as citizens are overloaded with guidelines on how to deal with increased uncertainty— whether by political actors, the media, or economic actors—the respective stream of communication raises permanent doubt. Naumann (2018), analysing attitudes towards institutions for retirement provision in 25 European countries with Eurobarometer data, points out that, in countries where extensive reforms have been undertaken, citizens have less trust in the overall pension system. He submits that such distrust is grounded in public discourses on (alleged) problems with that system, rather than in the actual design of the reforms. Likewise, Olivera and Ponomarenko (2017, p. 520), mapping experience with reforms across Europe find growing scepticism concerning social security in later life, together with a negative association between what they refer to as perceived ‘pension insecurity’ and current life satisfaction. Moreover, such experience may translate into negative emotional states. While the role of emotions in society has received growing attention in the social sciences over the last decades (Bendelow and Williams 1998; Greco and Stenner 2008), the bulk of welfare state research has sidestepped them until recently. Exceptions relevant to our analysis include work on fears related to moving into, or being trapped in, inferior class positions in contemporary capitalism (Neilson 2015); investigations on worries of the middle classes regarding their own and their children’s economic prospects (for many: Barbehön and Haus 2015); studies into young people’s pessimism concerning imagined futures (the feelings of the ‘generation K’, in the terms of Hertz 2016); and work looking at the influence of emotions when citizens engage with financial institutions (van Dalen et al. 2017).

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A core element in the emotional set-up of citizens engaging with their future under conditions of structural uncertainty is anxiety. This term denotes a diffuse feeling of lacking or losing control where it appears critical to human action (see Betzelt and Bode 2017, for a review of the related literature). This emotional state can arise where individuals feel helpless under diffuse circumstances; more precisely, where accustomed coping strategies fail when the challenge consists of meeting risks that appear both inevitable and incalculable. In the modern age, institutional arrangements, including those of the welfare state, have helped citizens cope with stress caused by such (ontological) uncertainty, cushioning fears related to an imagined future. However, the reverse effect may occur as well because institutional arrangements can evolve and put a life course at risk, at least in the perception of affected citizens. A major driving force may be what Furedi (2005) has coined ‘politics of fear’ in his analysis of political messages dealing with ecological life styles, health promotion, and education. Political discourse can nourish concerns about the viability of welfare state institutions and urge citizens to seek private solutions to dissipate these concerns (Betzelt and Bode 2017). In recent times, such politics have also been explored in work on urban spaces, crime, and securitisation (Lianos 2016), as well as with regard to public sentiments against social minorities such as immigrants, refugees, or underclass citizens (see Bauman 2016 or Hofmann 2016). Such sentiments can also arise from pension policies and related political discourse, since the long-term prospects of relevant social groups or an entire society are at stake here. In addition, borrowing from the recent debate on political authoritarianism, the respective sentiments may impact on the wider political orientations of contemporary citizens, as indicated by a growing support for xenophobic populist parties (Ketola and Nordensvard 2018; Norris and Inglehart 2019). In a nutshell, disorientation, when related to the planning of the future and the respective institutional arrangements, may materialise in cognitive stress feeding into emotional states of anxiety. The latter can be moderated, or intensified, by policies or public discourse, and may translate into erratic political behaviour, such as blind support of populist movements. These considerations are highly relevant when it comes to users on the welfare market for retirement provision in Germany. They beg the

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question as to which implications the experience with these markets has on a user’s mind-set concerning both own prospects in terms of retirement provision and, more generally, the capacity of welfare states to secure human well-being.

7.3 T  he German Pension System and Its Evolving Welfare Market The architecture and recent development of Germany’s pension system has been portrayed many times, including internationally (Clark 2003, pp. 79–140; Bridgen and Meyer 2014; Nullmeier, Chap. 5). For the purpose of this chapter, it appears sufficient to depict basic cornerstones of that system, as well as recent dynamics of the new private-public mix. The German pension system has grown as a multi-tiered defined-benefit arrangement that is composed of a pay-as-you-go, social-insurance-based core which we refer to as the first tier because it is the system’s central pillar.2 According to this logic, social assistance can be understood as a second tier (stepping in when entitlements to social security are lacking), while a third tier is composed of occupational and private pension plans. The social-insurance based core is funded by compulsory payroll contributions, half of them assumed by employers. It aims at preserving individual living standards, thereby ensuring high pension benefits for workers that did well in the labour market. Over many decades, wage replacement rates up to 70 percent of previous earnings and the pensions’ indexation on average salaries have made retirees participate in the increase of the nation’s wealth. The system also embraced survivors’ pensions, work incapacity benefits, and fictitious qualifying periods meant to honour childcare or elderly care efforts (some of the respective provisions are still in force). The public regime did not include independent workers (until 1972) and proved much less generous towards citizens with limited periods of formal ‘standard’ employment, such as non-breadwinner women. However, during the 1970s and 1980s, poor contribution records were upgraded; enforced contribution

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holidays (due to unemployment or illness) were partially taken into account for the calculation of pension entitlements. Non-statutory retirement provision was mostly confined to topping up income from the publicly steered pension system. Moreover, large corporations offered pension supplements to higher-waged employees, by utilising (tax-reducing) book reserves as capital investments in their own stocks. Sponsors were held legally responsible for their commitments. In addition, during the last decades of the twentieth century, a growing proportion of the German population purchased life insurance promoted through both fiscal incentives and a legally guaranteed basic interest rate. That said, all these arrangements were not meant to sustain the living standard achieved during a working life after retirement. Furthermore, only a minor part of retirement provision was operated within a market environment—life insurance was subject to strong public regulation, and occupational schemes were based on the defined-­ benefit model. Against this background, the shift of an important share of retirement provision to funded pension plans contracted by individuals or by companies on behalf of their staff implied ‘path-breaking’ change (Lamping and Rüb 2004, p. 175) in the German welfare state. It paved the way for a fully-fledged multi-pillar pension system (Schmähl 2007; Bode 2008, pp. 37–40, 66–69) in which part of retirement provision was left to market forces. Driven by the ‘funding obsession’ (Hill 2007, p. 135) affecting pension policies internationally,3 the official plan of the government at that time was to maintain living standards after retirement by publicly subsidised pension plans—while gradually reducing the wage replacement rate granted by the social insurance scheme. In the same vein, the public administration sector’s occupational pension plan became transformed into a semi-funded scheme. A welfare market for retirement income had thus been established (Willert 2013, pp. 141–160). The reforms extended the tax-relief on premiums invested in funded pension schemes and introduced direct payments to citizens contracting saving vehicles called ‘Riester’ pension plans, named after a former minister of labour.4 Providers became obliged to guarantee the nominal value of investments at the point of retirement.

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Furthermore, contracts had to be gender-neutral and to embrace the option of increasing or reducing contributions, and of putting a contract on hold. In addition, fees for moving assets to another vendor were capped. Moreover, new corporate pension plans were created, with differences between occupational schemes and private saving plans becoming ‘more and more blurred’ (Schmähl 2004, p.  159). Nowadays, occupational schemes and private pension plans are based on similar technical tools, with a growing part of contributions devolved on employees and risks being shifted to them. Employers contract financial institutions on behalf of their staff, without committing themselves to a given benefit level.5 A recent reform has altered the regulation of occupational pension schemes in private sector industries once again by promoting mere defined contribution schemes. As a result, the typical contractor cannot anticipate what both individual and company-based pension plans will eventually deliver. Due to the reforms, the financial industry discovered a new money-­ spinner. Its advisers became active promoters of the new, widely producer-­ driven pillar (in the sense of Gingrich 2011, p. 17), and after a few years, this industry was a taken-for-granted building block of the German pension system. That said, there has been considerable volatility in the new market. First of all, the return-on-investment promised to holders of funded pension plans had to be modified several times, because of the increasing longevity of savers and an erroneous forecast of the economic performance of stock markets. In the aftermath of the financial crisis, it became almost impossible to offer interest rates beyond the nominal guarantee of the money paid into a scheme (Nullmeier, Chap. 5). Accordingly, the life insurance sector—that continues to be the chief backbone of the private pension pillar—was hit by severe economic turmoil. Companies approached investors with suggestions to cancel their plans and shift money in risky, asset-based saving vehicles. Users have equally been erratic in many cases. Many of the contracted plans are on hold meanwhile—estimations say that this affects one out of five saving vehicles under the Riester regulation (BMAS 2020). In addition, it seems that wealthy citizens have signed a second contract, while poorer sections of the population are often unable to assess the new pillar at all (Metzger

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and Schoder 2013). Importantly, all these developments are well-covered by the public media which implies that they have become perceivable by a good deal of the population. Finally, following the aforementioned path-breaking reorganisation of the German pension system, there have been numerous changes to the regulation of that system and the new welfare market (Bode and Wilke 2014, p. 37; Schmitz 2017; Köppe, Chap. 6). These reforms, reflecting a process of layered institutional change, have repeatedly altered the conditions under which pension plans are promoted by fiscal instruments, concerning the size of subsidies; rules for tax-exemptions; fees charged by financial intermediaries; and eligible products. Moreover, the aforementioned legally guaranteed interest rate of life insurance plans was reduced to 0.9 percent (after having been 4 percent in 1994 and 2.75 percent in 2004). Some measures were meant to make private saving plans more attractive, others to help consumers understand the complexity of the market. From 2018 onwards, occupational pension plans under a collective agreement—fixed by trade unions and employers’ associations at industry level—benefit from additional tax-exemptions, in particular if plan holders are low wage earners. Furthermore, during 2019, the government developed plans to reduce social security contributions due by beneficiaries of occupational pensions, to give the latter, now redesigned as mere defined-benefit plans, an additional boost. At the same time, some reforms have consolidated the public tiers of the pension system. For parents having cared for children born prior to 1991, qualifying periods have been upgraded; workers with very long careers have been given the opportunity to retire earlier, and disability benefits have improved. In 2020, new reform plans have been launched, concerning, among other things, the level of minimum pensions (that shall be raised). In addition, the envisaged progressive decline of the wage replacement rates has been halted, with a moratorium until 2025. Hence, a continuous recalibration of the regulatory framework espoused volatile developments in a market where coordination problems abounded, due to both the uncertainty inherent in the (relatively) uncontrolled flow of financial transactions and the competition-driven agency of pension providers keen to influence voluntary decisions taken by users. Altogether,

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the welfare market created in the German pension system proved capricious—and given that Germans still seem to long for social security, the question arises of how they are coping with this situation.

7.4 T  he Experience of Disorientation: Empirical Insights Thus far, research on how and to what extent citizens experience disorientation with regard to multi-pillar retirement provision is in its infancy (but see Rowlingson 2002 or Taylor-Gooby 2005). Concerning Germany, studies in the attitudes towards welfare state institutions abound but mostly cover public pensions (e.g. Gabriel 2013; Heinrich et al. 2016), showing that the bulk of the population is still supportive of classical welfare state institutions including social insurance for old-age. However, there is little knowledge about the mind-sets of citizens dealing with private pension provision and their emotional implications. According to various opinion polls, many Germans currently assume that it will be difficult to live on one’s public pension. In a more sophisticated survey, two out of three respondents saw considerable risks for themselves or for others (Götte 2015, p. 40). A study by Hurrelmann et al. (2019) suggests that younger citizens prove particularly sensitive to the insecure future of pension provision. While surveys dealing with personal worries among Germans imply that a majority of citizens are ‘of good cheer’ regarding their individual future, income deficits in later life at present seem to be ‘the biggest concern’ among the wider citizenry (Lübke and Delhey 2019, p. 43, own translation). Hence, it makes sense to dig deeper and explore the orientations of users of the contemporary welfare market for retirement provision, including with an eye on wider consequences regarding the future of politics.

7.4.1 Research Design and Methodology In what follows, results from a series of investigations are presented in a condensed way to shed light on the cognitive and emotional experience

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of citizens engaged with the planning of their future (after retirement) in the context depicted above. The overarching research categories for these investigations have been the cognitive and emotional handling of uncertainty in the area of retirement provision, with additional attention being paid to the wider implications in terms of attitudes towards basic institutions of the welfare state. First, we summarise results of a secondary analysis based on a well-­ established German panel study, the so-called SAVE survey, which embraces a fixed set of questions about income, held assets (including those meant to be used during retirement), household characteristics, and basic attitudes.6 To exploit the data, descriptive statistics and cross-­ sectional logistic regression were used (details are provided in Wilke 2016). Secondly, we present results of a telephone survey run in early 2017. This survey, operated by an external agency, used a CATI approach (Bode and Lüth 2018),7 focusing on status loss and feelings associated with it. The analysis aimed at exploring how expectations concerning one’s income in later life were associated with cognitive and emotional orientations as well as with political attitudes. Finally, we summarise insights from qualitative interviews with a sample of (well-educated) citizens in their early career, which we use to tease out potential reactions to challenges posed by marketised pension provision (Bode and Wilke 2014). For the respective interview sections, a ‘light-touch’ grounded-­ theory methodology was employed, using generic codes associated with terms signalling disorientation and its emotional implications.

7.4.2 Results First of all, the aforementioned secondary analysis of available survey data brings to the fore that ignorance is considerable when it comes to retirement planning. Referring to Fig. 7.1, only one in two citizens (approximately) is aware of the replacement rate he or she will benefit from when retiring. As a tendency, those holding a private pension plan and those who are better-educated seem to have an extended knowledge in that respect. However, when respondents are asked to estimate what the public and

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Knowledge of replacement rate in first pillar Knowledge of replacement rate in public and private pillar

Long-term planning

0

10

20

30

40

50

60

70

% 80

all

with private pension

with private pension and older than 50

with private pension and higher education

with private pension and fixed-term contract

Fig. 7.1  Knowledge and planning concerning future retirement provision (Source: SAVE 2008/2009; calculations F. Wilke; unweighted results; students, pensioners and people above 64 excluded, knowledge assumed if question about the level of replacement was not refused/question about planning was answered yes)

private tiers combined will deliver, respondents feel much less wellinformed (20 percent less on average). One can infer from this that many Germans cannot foresee what the multi-pillar pension system will yield in terms of old-age income. Concomitantly, Germans hardly seem engaged with a more serious long-term planning concerning income streams in later life. The analysis of the SAVE data shows that less than 30 percent of the respondents have approached more than one financial institution for this purpose, and even among those with the highest educational level, only a minority (about 40 percent) are playing the game and try to behave like wise consumers. Citizens in insecure employment mostly forego any pension planning. Importantly, as multivariate analysis reveals, it is not financial literacy that makes a difference here. Rather, accumulated wealth (measured by assets held by the respondent) turns out to be influential—the higher the amount of owned assets, the higher the propensity to plan the

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future. More generally, as a tendency, it is citizens who have a secure stream of income who engage in long-term planning and are willing to take financial risks in this context. Overall, however, efforts to improve one’s state of cognitive orientation regarding the conditions under which to live after retirement are quite limited, especially for those who would need this orientation most. Hence, welfare markets do not necessarily generate typical market behaviour, and cognitive skills are far from being a primary difference maker. In our telephone survey, respondents were asked to imagine their situation right before retirement. Among other things, they should indicate the percentage of income they would deem necessary for preserving their living standard after retiring. In a next step, they were asked about how much they thought they would then receive in terms of the percentage of pre-retirement earnings, with a differentiation between the substitution rate granted by the social insurance scheme and the entire income after retirement. The results reported in Tables 7.1 and 7.2 show, that the median substitution rate deemed necessary for maintaining an achieved living standard amounts to 78 percent; the one expected from social security is 54 percent, whereas the rate including other income streams is 70 percent. Of those eligible for social security pensions, 77 percent say they expect Table 7.1   Sources of expected retirement income Expects income from … First tier:   Public pension   Civil servants’ state pension   Liberal professions’ pension Second tier: social assistance Third tier:   Private pension plan   Life insurance   Occupational pension plan   Occupational pension plan (state employees)   Other At least one third tier source Working during retirement

Percent of respondents 85 8 4 15 42 21 24 12 17 69 20

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Table 7.2   Expected substitution rates Subjectively expected personal income substitution rate (SR) in retirement  (1) Necessary SR  (2) Expected SR (first tier)  (3) Expected SR (all retirement schemes)  (4) Pension gap: (1)–(2) (first tier)  (5) Pension gap: (1)–(3) (all retirement schemes)

Median (percent)

78 54 70 22 1 Percent of respondents Is able to estimate necessary SR 85 Is able to estimate expected SR 73 Expects an SR that is short of 10 percent of necessary SR 27

additional income from other sources (predominantly occupational schemes or private forms of saving). While many people seem to be quite optimistic concerning their prospects in later life, almost a third of the respondents expect their retirement income to fall short of 10 percent of what they deem necessary. Moreover, a considerable proportion of the respondents find it likely that they will be dependent on social assistance (15 percent) or will have to keep working in retirement (20 percent). Consequently, people see reasons to worry. What is more, referring to Fig. 7.2, half of the respondents show negative emotions concerning their prospects in that respect, with the respective fears being stronger than those related to their short-term economic future. Almost 20 percent of all respondents expound they have strong or very strong concerns with regard to their expected living standard during retirement. Overall, as shown in Table 7.3, the prevalence of negative emotions does not vary greatly by place of living, education, or employment status (although the findings for men and older persons slightly deviate from the general pattern). The regression analysis results suggest that income has an insulating effect on negative emotions with regard to the expected personal living standard; still, anxiety seems widespread in all but the highest social strata. This implies that many Germans feel unsettled concerning the capacity of the public-private mix to ensure a decent later life.

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… in the next year

15

… in retirement

13

17

0

19

10

20

anxious

40

30

very anxious

Fig. 7.2  Anxiousness regarding personal standard of living, percentages (Note: anxiousness was measured on a scale of 1–5; being anxious was assumed with a score of 3 or above, very anxious if respondents scored 4 or 5) Table 7.3  Anxiousness regarding personal standard of living—multivariate regression In the next year

In retirement

Variables

coeff.

coeff.

sig.

Male West Germany Living with partner University degree Apprenticeship diploma Working (part-time) Not working Age 42–48 Age 49–54 Age 55–58 Second income quintile Third income quintile Fourth income quintile Fifth income quintile Constant R2 (adjusted) N

0.01 −0.01 −0.10 −0.02 0.12 −0.05 0.12 −0.00 0.20 −0.05 −0.34 −0.80 −0.97 −1.22 2.71 0.086 365

−0.40 0.14 −0.18 −0.06 0.13 −0.08 −0.15 −0.28 −0.28 −0.36 −0.39 −0.91 −1.09 −1.26 3.53 0.10 356

**

sig.

** *** ***

* ** *** ***

Note: Dependent variables: anxious in regard to personal standard of living in the next year or in retirement; base categories: no professional qualification; employed full-time; 36–41 years of age; first-income quintile *p