What Future for Social Investment?

Nathalie Morel (1) , Bruno Palier (1) , Joakim Palme (2)

1 CEE - Centre d'études européennes et de politique comparée (Sciences Po, CNRS)
2 Institute for Future Studies

Executive summaryDuring the Lisbon Summit in 2000, the European Union – partly inspired by the new ‘social investment’ paradigm – adopted a new approach to meet the future challenges of ageing populations and the shift towards a knowledge­based and service economy. The Union expressed its intention of making Europe become ‘the most dynamic and competitive knowledge­based economy in the world, capable of sustainable growth with more and better jobs and greater social cohesion, and respect for the environment by 2010’. It appears that the strategy was based on the view that human capital was the core asset in Europe.The targets of the Lisbon strategy seemed difficult to achieve for many countries even before the global financial crisis of 2008, and it is now clear, with less than one year left, that these targets will not be met. In a long­term perspective, Europe faces a number of common challenges related to environmental concerns and the threats of climate change, deregulated financial markets, mobile global capital, ageing populations and de­industrialisation. The current economic crisis has made these long­term challenges even more acute. It is therefore of great importance that future policies go beyond immediate responses to the current crisis in order to face these long­term challenges and to avoid reproducing the failures of the past. The contributions to this report give an assessment of the social investment strategy as it has been pursued in different national contexts and provide not only a framework for reform but also a number of concrete examples of how to promote or improve the social investment approach:• The development of publicly funded child care and education programmes constitutes an essential dimension of the social investment approach. Such services express the goals of this perspective in two ways: they invest in the human capital of mothers by helping them remain in paid work; and they invest in the human capital of children by providing them with quality educational stimulation at an early age. From this perspective, many of the policies currently being adopted for reconciling work and family life are inadequate. Strategies like long parental leave or vouchers for the purchase of private services may offer some immediate support to parents but lack the long­term perspective that is central in terms of social investment.• Human capital policies that promote participation in education throughout the life-course are crucial. Skill needs within advanced industrial societies have changed quite dramatically in the past decades. In particular, demand has increased for higher levels of skills as well as for cognitive and social skills. Viewed from a historical perspective, investment in vocational education followed an economic logic whereby firm in European economies relied on specialised vocational skills. In the knowledge­based post­industrial economy, however, new skill needs outline an economic logic for the expansion of public education policies. Policy agendas aimed at advancing human capital policies as part of their social investment strategy need to address the growing economic benefits of investing in education.• If social investment is to be the defining feature of the new welfare state, then one should certainly differentiate between ‘varieties of social investment’. Within the field of labour market policy, one can identify at least three different approaches that refer to different principles and have different objectives: investing in human capital, removing obstacles to employment and preventing the depletion of human capital during a period of unemployment. While policies geared towards preventing human capital depletion seem to have gone out of fashion, countries tend to emphasise either training or policies aiming at removing obstacles to labour market participation. Both approaches are connected to work incentives. But if the current crisis results in a longer period of high and persistent unemployment, strengthening work incentives may be an inadequate response in a context of sluggish economic growth and employment losses. In contrast, active labour market policies that target human capital seem preferable, including job creation programmes aimed at slowing the process of human capital depletion associated with unemployment. • There is also reason to think beyond the assumptions of the current era as a knowledge-based economy, which is the underlying rationale of the Lisbon strategy. A slightly different approach, here defined as ‘the learning economy’, focuses more on the rate of change and the consequential requirements of constantly renewing capabilities in firms and competences for workers. What the comparison of European economies shows is, firstly, that innovation tends to thrive in societies where workers are engaged in organisational learning and do creative work and, secondly, that creative work is most widely diffused in egalitarian societies with broad­based and democratic education systems and with labour market institutions that combine flexibility with active labour market policies and income maintenance for the unemployed.• There is thus a need to combine social policies with policies that promote organisational change. The focus should be upon social investments and institutional change related to the organisation of work and learning. Three tasks stand out as particularly important, especially for Southern and Eastern Europe: to expand systems of vocational training and aim at new combinations of theory and practice in the overall education systems; to develop active labour market policies and institutions that support flexicurity; and to reduce inequalities in income and in access to learning. Such a programme would increase social cohesion both nationally and for Europe as a whole since it would help reduce the big gaps in income between the different parts of Europe. And it would certainly strengthen the competitiveness of the region as a whole.• The social investment approach can be seen as a strategy that aims at simultaneously promoting competitiveness and growth, employment and quality of jobs. It is essentially about resolving the trade­off between efficiency and equality. Achieving this goal is dependant on how credible policies can be formulated and delivered. Different examples of best practices can be identified that help to simultaneously widen the tax­base, increase fertility, fight poverty and inequality, or improve the financial sustainability of certain key programmes such as pension schemes.These points give examples of a common theme in the various contributions to this report, which is that the way we design our institutions is critical for what kinds of achievements we can expect. But it is also evident from the contributions that politics matter for what kinds of chances the social investment strategy will have in the future. Political courage is demanded for anyone who want to bring long­termism into policy making. We need to put that high on the agenda. This report aims at stimulating the scholarly and political debate on the future of the social investment approach. By bringing the analytical light to bear on the interplay between social, educational and labour market policies, it looks at how different European countries face the new requirements of the ‘knowledge­based’ or ‘learning economy’ and puts forward some ideas for policy innovation. Both the current economic crisis and the common long­term challenges that Europe faces make such innovations urgent. With the Lisbon agenda coming to its close in 2010, the time is ripe to invent a new future

Domaines: Science politique; Sociologie

Nathalie Morel, Bruno Palier, Joakim Palme. What Future for Social Investment?. [Research Report] Institute for Futures Studies. 2009, pp.194. ⟨hal-02190347⟩