Becoming Post-modern, Without Being Modern? Interpreting the Development of Welfare State in Estonia, Latvia and Lithuania Abstract

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1 Becoming Post-modern, Without Being Modern? Interpreting the Development of Welfare State in Estonia, Latvia and Lithuania Abstract Prof. Dr. Anu Toots Professor of Comparative Public Policy Professor, Tallinn University Expansion of the Welfare state to the Mediterranean countries and to the Central and Eastern Europe has provoked academic interest for various reasons. One of them was the attempt to use developments in these regions as a testing ground for the existing theory of welfare regimes. The dominating assumption was that less developed European peripheries will evolve in the same direction as established Western European welfare regimes. Therefore the whole process was seen as a transition from the collapsed authoritarian regime to the one of the Esping-Andersen s welfare models. In early 21.century the need to revise radically traditional understanding of the welfare state becomes well voiced in research literature (Pierson, Taylor-Gooby, Bonoli). However, this understanding did not affect studies on post-communist welfare states. Typical analyses are based on the comparison of social spending statistics, which clearly show post-communist countries as underdeveloped, lagging behind the European average indicators. According to the dominant assumption Eastern Europe has to go through all stages of development to catch up the European Social Model. Putting it differently, basic characteristics of a modern welfare state like strong labour market institutions with traditions of social dialogue, solid industrial economy with well regulated work relations, generous welfare spending and clear social cleavages across class lines should become obligatory components for a contemporary welfare states in Eastern Europe. In my opinion, there are some basic misconceptions: Firstly, mature welfare states have entered into new era of post- or second modernity (Beck). Thus, a reconceptualisation of main variables is necessary. This has become more common regarding the western welfare state, but should be extended to the analysis of postcommunist welfare regimes as well, since the post modernity is not a narrow Western European phenomenon. 1

2 Secondly, the concept of societal transition seems somewhat too narrow in the current era of uncertainty and globalization. Adaptation to the various post-industrial pressures becomes more important today than movement from A to strictly defined B. Thus, when studying post-communist welfare states one should focus on their adjustment to the current circumstances rather than measure how far they stand from Western European welfare models. Thirdly, Soviet regime of 1980-s was not a pure case of totalitarianism, but a complex socio-economic system having strong impact on key areas of the welfare state, for example on employment and family patterns. The heritage of Soviet regime makes accommodation of some new risks potentially easier (for example with regard to the female labour market behaviour or egalitarian educational capital). The fact that the concept of welfare state was in Baltic States never bound to the national identity, facilitates today radical social reforms and flexibility also. Current paper challenges some of these misconceptions on the bases of empirical evidence from three Baltic countries. My central idea is to show that to cope efficiently with challenges of postmodern retrenched welfare state, it is not necessary to achieve the full modernity. I elaborate my argument by looking firstly, at the level of welfare spending in conjunction with economic growth, and secondly, by studying developments in key areas of contemporary welfare state as employment and family affairs. Adaptation to the post modern conditions can be regarded as successful if the stability of welfare spending is accompanied by the stabile or decreasing level of poverty and by expanding and flexible employment. In the Golden Age of the welfare state the share of welfare spending has been the major variable to evaluate the development of welfare states. Therefore, the main fear in the era of austerity was that welfare spending will be cut down. Since the focus of modern welfare state was on ex-post redistribution, decline in funds was explicitly associated with the potential increase in poverty. Post-communist countries did not share this path, because their welfare budget did not increase in concordance with GDP growth. Estonia, Latvia and Lithuania experienced in the average GDP growth 8,5%, but social protection expenditures decreased approximately within the same period by 2,5% reaching just 12,5% of GDP in Old age pensioners and unemployed never enjoyed generous benefits in transitional countries, therefore expectations towards governmental support was not so strong here. 2

3 However, the fact that Estonia, Latvia and Lithuania spend on social benefits less than half of the EU average does not say much about their adaptation to the post modernity. Here we need to look in depth at employment patterns, especially with regard to the new social risks. The modern welfare state in Continental Europe was oriented toward male full time worker. Women with children, part-time workers or persons with fixed term contracts were in more vulnerable positions both in terms of saving their jobs and escaping the poverty. With arrival of the post modernity it was understood that there is a pressing need to increase flexibility of the labour market in order to facilitate employment among those who cannot take a full time job. One might expect that post-communist countries, which have not experienced a true industrial labour market (including strong social partners) will quickly adjust to the post modern conditions of liquid modernity. However, this did not happen. After the collapse of planned economy women and aged employees loosed their jobs more often than men; part time jobs were very limited and typically only at the lowest wage level. The latter features have remained typical for three Baltic States also today, despite of better balance between jobs and jobseekers. Labour laws are more rigid and the employment rate lower than in most Western European countries. In result we have an interesting situation, where despite of the absence of path dependency with modernity, Estonia, Latvia and Lithuania cannot adapt post modern employment patterns. Yet, focusing on family and gender issues we find a different picture. All three countries inherited from Soviet period a strong reliance on adult worker model, where employment pattern did not reveal any gender differences. When the worst years of shocking market reforms were over, female employment rate began to increase fast. Differently from the mature continental European welfare model, female unemployment in Baltic States is lower than male unemployment rate. Also, in contrast with Continental welfare model, female employment growth exceeds in Baltic States male employment growth. Both trends are in contrast with typical labour market patterns in EU15. For example, the average female employment growth in BS3 in 2006 was 4,2%, in EU15 1,8%. The same figures for female unemployment rate in 2007 were 4,6% in BS3 and 7,7% in EU15. Similar difference can be found in terms of youth unemployment, which, being higher than the average has in BS3 decreased in a much greater extent in last 4-5 years than in the EU15. 3

4 Summing up the employment issue one can argue that Estonia, Latvia and Lithuania have been more successful in adapting new social risks (NSR) associated with contemporary family patterns whereas in modernising labour relations. One can suggest that this was made possible because of adequate family policy measures. All 3 Baltic States (standing in the very bottom of EU27 in terms of total welfare expenditure) spend to family and children more than the EU average. This argument can be supported also by the fact that Lithuania, which spends on family policies less than Latvia and Estonia, has also weakest growth in female employment. However, an additional study is necessary to control whether increase in female employment coincides with the introduction of significant family policy measures. At the current state of my knowledge, this may not be the case. Let us now turn to the poverty problem. How are Baltic States coping with this issue that becomes more painful for contemporary Western European welfare states? Despite of the stabile or even slight decrease in social protection expenditure in BS3 the dynamics of poverty is quite similar to the EU average, i.e. at risk of poverty rate is increasing by 2-3% in last 5-6 years. Estonia shows even a decrease in poverty rate. However, there is one basic difference between the Baltic States and Western Europe. In EU15 social transfers decrease at risk of poverty rate by 10%, in BS3 by 5-6%. Consequently, in Estonia, Latvia and Lithuania well-being is less dependent on the welfare state. Since poverty indicators do not reveal any remarkable gender difference, one can suggest that higher female employment does not contribute to the improvement of personal well-being. Thus, women active participation at labour market affects macro level indictors (dependency ratio, total social spending) but leaves micro level performance largely unaffected. Summing up the discussion one can conclude that post- communist countries represent interesting, but controversial material for welfare state studies. BS3 were successful in recovering high female employment; they also succeeded to hold poverty level under control when decreasing the share of total social spending in GDP. At the same time, expansion of female employment does not give remarkable financial gains for women; neither are options for flexible employment satisfactory. Thus, some aspects of welfare state development in post-communist Baltic States demonstrate promising adjustment potential. The question is whether this is enough for the survival in the era of post modernity? 4

5 About the author: Anu Toots is a professor of comparative public policy at Tallinn University, Estonia. She has published several research articles on educational policy, social security reforms and public e-services. Among them are: Matthes, C., Kacienskiene, M., Rajevska, F., Toots, A. (2007). Rentenreform im Baltikum: Neue Modelle im Praxistest. Osteuropa 57.jg., 7, S Toots, A. (2006) Why do actors vary? A study of the Estonian pension and unemployment insurance legislations. In. Guy Peters,B., Sootla, G., Connaughton, B. (Eds.) Politico-administrative Dilemma: Traditional Problems and New Solutions, NISPAcee, pp Toots, A. (2006 ) Explaining Internet Service Quality in Social Security Agencies using Institutional Theory. Information Polity: The International Journal of Government and Democracy in the Information Age.Vol.11(3,4).IOS Press pp