The term ‘welfare state’ is defined as a type of governing in which the national government plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those unable to avail themselves of the minimal provisions of a good life. Social Security, unemployment benefits or those people unable to work, are all examples of the welfare state.”[1] One of the pioneers in embracing a welfare state form of governance is Sweden. By the 1930s, it had introduced health and unemployment insurance for wage earners, housing subsidies, old age pensions, paid vacation, and a maternity leave plan. Scandinavian countries dealt with unemployment by retraining.
Over the years, Malta adopted a hybrid model of welfare[2] having similarities and differences with southern European, continental, social-democratic and liberal models. As a member state, EU policies impact Malta’s welfare model. In this respect, what is the extent of globalisation of social policy beyond national borders? What are the challenges impacting the Welfare State today and in the near future?
Some of the challenges include affordability of the welfare state, international competitiveness, new social risks, and ageing.[3]These are the products of the neo-liberal era and reflect some of the political-economic trends.
Affordability threatens the future of the welfare state. How do Governments persuade people that they should pay higher taxes in return for more extended and improved public and social services? Many-a-time the amount of taxes collected does not keep pace with the financing of the broad spectrum of social and welfare services provided by the state. This can be addressed by eliminating certain public services, reforming services to cut costs, increase taxes as well as borrowing. These options render Governments unpopular. Scandinavian social democracies tend to have a generous welfare state but the highest rates of taxation. Anglo-liberal democracies have the least welfare state and the lowest taxes together with the conservative-liberal states of the eurozone in between. The challenge is political will.
The second key challenge facing the welfare state is globalisation. This has led to Brazil, India, and China – the emerging power houses – to transform the international economy, division of labour and future governance. Service and manufacturing jobs in Western economies are being outsourced to third country nationals, who are paid lower wages than Western counterparts. Entitlements and welfare benefits have made western workers less competitive. For Malta to be more competitive, it needs to upskill its labour resources, use networks and capital to develop services and products which cannot be replicated by cheap labour. This would mean substantial investment in human capital. At times, the employment of skilled migrants creates political and social tensions over jobs, schools, housing, and their integration within local society.
Should Malta continue to increase the importation of foreign labour from countries with an excess labour force? The challenge is that if the influx of foreign workers and their families is not thoughtfully planned and managed, then there would be a heavy strain on housing, medical and educational services, infrastructure as well as challenges related to social inclusivity and integration with the local population.
The third and fourth challenges refer to new social risks where patterns of dependency, households, and work have emerged. These include the poverty rate, female participation in the labour market, and low skilled workers. An ageing population will potentially affect the welfare state. It is assumed that the redistribution of resources between generations guarantees sufficient income as well as social and health care in old age. However, it assumes that there is a continuous and steady supply of young workers to replace a retiree and that the flow of active Maltese workers is greater than those who retire. The retirement age was raised to 65 years[4] indicating that that there are not enough workers in the labour market.
These challenges pose several dilemmas for the well-being of Maltese society. Are we being complacent and taking the welfare state for granted? Is there a general sense of entitlement that could potentially endanger the welfare state? Should we be rethinking ways and means how to ensure that the welfare state is tailor-made to societal needs and aspirations?
The economic model of seeking to maximize GDP growth on small island state like Malta can be highly problematic as it brings severe stress to bear on our environment, transportation, and infrastructure. There is a misconception that letting the forces of a neoliberal capitalist system through trickledown economics will automatically address issues relating to social inequalities. There is a need to have mechanisms and tailor-made programmes to address the specific needs of those who are disadvantaged and have not benefitted from economic growth.
We must consider an economic model that gives value to sustainability and quality of life issues. Unbridled economic growth without limits can no longer be the mantra. It is time that we consider the adoption of a new model of decentralised social democracy. While Government would retain its traditional function of providing public goods, services, and social insurance, it would assume “the new role of guaranteeing and monitoring economic democracy through the involvement of stakeholders in all decision bodies which affect their [main] interests.”[5] In this way, the state would be emancipating people by enabling them to flourish by themselves by giving them rights and capabilities.
References
Briguglio M. and Bugeja, I., (2011). Exploring Malta’s Welfare Model in Bank of Valletta Review, 43, Spring 2011.
Fluerbaey, M., (2018). A Manifesto for Social Progress, Ideas for a Better Society, Cambridge University Press, p.166.
Gamble, A., (2016). Can the Welfare state survive? Polity Press, Cambridge.
EU Commission, Employment, Social Affairs & Inclusion (2022). Malta – Contributory Pension for Retirement https://ec.europa.eu/social/main.jsp?catId=1121&intPageId=4698&langId=en#:~:text=In%20order%20to%20claim%20a,to%2065%20years%20by%202027
Kenton, W., (2022). Welfare State, Government and Policy in Investopedia https://www.investopedia.com/terms/w/welfare-state.asp
[1] Kenton (2022).
[2] Briguglio and Bugeja (2011).
[3] Gamble (2016).
[4] EU Commission (2022).
[5] Fluerbaey (2018), p.166.
