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Inclusive Growth: What Future for the European Social Model?

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  • Schmid, Günther

    () (WZB - Social Science Research Center Berlin)

Abstract

This essay starts, after a short introduction on the importance and dimensions of “inclusive growth”, with a brief empirical sketch on to what extent Europe has already succeeded with respect to this ambitious goal. The result is quite sobering and gives rise to the question: why is it so? The main part of this paper is devoted to answering this question by presenting a model based on the trade-off between comparable productive capacity (CPC) and flexibility. After the introduction of the monetary union, this trade-off sharpened for many EU member states whose CPC now falls below the fair level playing field. To compensate for the lack of comparable productive capacities, flexibility measures would be necessary (e.g. downward wage flexibility, regional mobility and cuts in social expenditures) to an extent which is unrealistic or would erode social cohesion and democracy. As alternative, the possible future role of the European Social Model could consist of the implementation of four strategies: First, investive social transfers, in particular by establishing a European Fund for Employment and Income Security (EIS) to strengthen the inclusive function and stabilisation impact of national unemployment insurance systems; second, protected flexibility, in particular the promotion of an internal functional flexibility through work sharing; third, investing in people, in particular by strengthening dual learning systems and by inducing mobility chains (making transitions pay); and fourth, efficient labour market regulation for better utilising existing capacities and restraining inefficient forms of flexibility. Examples for each strategy are presented to illustrate and stimulate the debate.

Suggested Citation

  • Schmid, Günther, 2014. "Inclusive Growth: What Future for the European Social Model?," IZA Policy Papers 82, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izapps:pp82
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    Cited by:

    1. Emilia Herman, 2016. "Productive Employment in Romania: A Major Challenge to the Integration into the European Union," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 18(42), pages 335-335, May.
    2. Dandes Albert Aurel, 2016. "The Idea Of Social Policy In The European Union And Its Impact On The Member States," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 2, pages 117-121, December.

    More about this item

    Keywords

    Europe; social policy; labour market policy; growth; inclusion; unemployment insurance;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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