WELFARE STATE IN CENTRAL AND EASTERN EUROPE
Agne Lauzadyte-Tutliene,Tomas Balezentis, Egle Goculenko100ISSN 2071-789XRECENT ISSUES IN ECONOMIC DEVELOPMENTLauzadyte-Tutliene, A., Balezentis, T., Goculenko, E. (2018). Welfare State inCentral and Eastern Europe. Economics and Sociology, 11(1), 100-123.doi:10.14254/2071-789X.2018/11-1/7WELFARE STATE IN CENTRALAND EASTERN EUROPEAgne Lauzadyte-Tutliene,Vilnius University,Vilnius, Lithuania,E-mail: agne.lauzadyte@gmail.comTomas Balezentis,Vilnius University,Vilnius, Lithuania,E-mail: tomas@laei.ltEgle Goculenko,Vilnius University,Vilnius, Lithuania,E-mail: eglegoculenko@gmail.comReceived: October, 20171st Revision: January, 2018Accepted: February, 2018ABSTRACT. This study aims at analyzing the existingwelfare state models in Europe and investigating welfareregimes in the countries of Central and Eastern Europe.The hierarchical cluster analysis, employed in this study,revealed that five welfare state models can be distinguishedin this region. The analysis also revealed that Central andEastern European countries are too diverse to form asingle cluster, and thus two models of the welfare state the Eastern Europe welfare model and the Central Europewelfare model – could be distinguished. Meanwhile, whileinvestigating the situation of Central and EasternEuropean countries in the more general European context,it was observed that Central European welfare model iscloser to the old European countries, while the EasternEuropean welfare model is very different from all othermodels.DOI: 10.14254/2071789X.2018/11-1/7JEL Classification: B55, D60I38Keywords: welfare state, Eastern Europe welfare model, CentralEurope welfare model.IntroductionInvestigation of the welfare state as a phenomenon began in the middle of the 20thcentury, however, quality of life remains to be a relevant topic today (Bartkowiak-Bakun,2017). Reduction of social marginalization and income inequality, and ensuring prosperity foreach member of society are the main objectives of the welfare state (Khouri et al., 2017;Draskovic, 2017; Beg et al., 2017; Calinescu et al., 2018). Therefore, welfare state is oftenassociated primarily with Scandinavian countries with their very well developed systems ofsocial benefits.However, shared values and interaction between the market, the family and the stateare equally important. Based on the chosen social policies aimed at reducing inequalities insociety, a certain model of welfare state can be assigned to the state. Despite the significantinterest of scientists, there is no single and clear way to investigate the existing model ofwelfare state in each country. And particularly, very little attention has been paid to theanalysis of welfare state in Central and Eastern European countries.The global financial crisis which began back in 2007 has been a challenge for welfarestates and has led a number of governments to the decision to review their social policies.Economics & Sociology, Vol. 11, No. 1, 2018
Agne Lauzadyte-Tutliene,Tomas Balezentis, Egle Goculenko101ISSN 2071-789XRECENT ISSUES IN ECONOMIC DEVELOPMENTChanges in the volumes of social benefits and/or their provision rules as well as demographicsituation have affected further development of the welfare state (Meyer et al., 2017; Ushakovet al., 2017).This study aims at analyzing the existing welfare state models (Draskovic et al., 2017)in Europe and investigating welfare regimes in the countries of Central and Eastern Europe.The hierarchical cluster analysis, employed in this study, has revealed that five welfarestate models can be distinguished in Europe. The analysis also revealed that Central andEastern European countries are too diverse to form a single cluster, and thus two models ofthe welfare state – the Eastern European welfare model and the Central European welfaremodel – could be distinguished.While investigating the situation of Central and Eastern Europe countries in thegeneral European context, it was observed that the Central Europe welfare model is closer tothe old European countries, while the Eastern Europe welfare model is very different from allthe other welfare state models.The structure of the paper is as follows. Section 1 presents the literature review.Section 2 explains the suggested research methodology. Section 3 is dedicated to the resultsof cluster analysis, while section 4 compares Eastern and Central European welfare statemodels.1. Literature reviewBritish scholar Richard M. Titmuss, who in the late 1960s presented welfare statesclassification scheme and distinguished the Residual, the Industrial AchievementPerformance, and the Institutional Redistributive welfare models (Titmuss, 1974) is generallyconsidered to be the pioneer of the social policies modeling. In the countries of the residualmodel, families are given priority and the state intervenes only in the extreme cases when thefamily itself can no longer take care of its well-being. In the welfare state of production, asignificant role is played by the social welfare institutions that provide support in terms ofperformance and productivity, while the institutional redistributive welfare model providessocial services based on the need, seek social equality.However, the greatest impact on the further research of the welfare states had Danishsociologist’s Gosta Esping-Andersen's classification, which was based on decommodificationand stratification criteria. Decommodification here reflects the degree to which individualscan maintain a socially acceptable standard of living without market intervention, i.e. themore favorable the possibility of receiving state social benefits or other state support, thehigher is the level of decommodification; while stratification means the division of societyinto social strata by income level, education, social status or other characteristics (EspingAndersen, 1995). This scholar, based on the relationship between the state, the market and thefamily, distinguished three theoretical models of the welfare state: the Liberal, theConservative-corporatist and the Social democratic.In the classification above, the liberal model is characterized by low social benefits forthe poor, while the preference is given to the market. As state social benefits are modest, thelevel of decommodification in the liberal model is low. This results marginalization betweenthe poor and the wealthy, and therefore stratification in terms of income is evident.In the second, conservative-corporate, type of welfare regime the priority is given tothe church and the family, while the private wealth creation becomes less significant. Thesignificance of the state social benefits in this model is lower than in that of the liberal type,and therefore the level of decommodification is moderate. The social insurance system isoriented towards the individuals of various occupations and allocates the sickness andunemployment benefits, the pensions and the other cash benefits accordingly, i.e. the socialEconomics & Sociology, Vol. 11, No. 1, 2018
Agne Lauzadyte-Tutliene,Tomas Balezentis, Egle Goculenko102ISSN 2071-789XRECENT ISSUES IN ECONOMIC DEVELOPMENTinsurance system is based on the merit principle. However, in support of the traditionalfamily, in which maternity is supposed to be the main task of women, there is a lack of daycare centers and similar types of services to ensure equal opportunities between men andwomen, while the support is provided to family only when it‘s no longer able to take care ofitself. Thus, in the conservative-corporate type of the welfare state, the population is dividednot only according to achievements, but also gender-based (Esping-Andersen, 1995).In the third, social democratic, welfare model, the preference is given to equality,while the state seeks to ensure the high living standards for all members of the society. Theconcept of equality in this welfare regime is perceived widely, i.e. it‘s not only limited toincome equality, but focuses on equal opportunities and equal treatment. Unlike in the liberalor conservative-corporate models, the social assistance does not remain as the last incomesource for those who can no longer take care of themselves, but it is provided as a preventivemeasure. However, the high standards of living and generous benefits result high taxes, thus,it is extremely important to ensure low unemployment rate. Due to the high influence of thestate, the level of decommodification is high.Esping-Andersen tested these theoretical models by conducting an empirical study ofthree social welfare programs: pensions, sickness benefits and unemployment benefits(Esping-Andersen, 1995). After analyzing the 18 Member States of the Organization forEconomic Co-operation and Development (OECD), the author attributed them to the Liberal,the Conservative-corporatist or the Social democratic model of welfare state.Although the classification of the welfare states by Gosta Esping-Andersen served asthe basis for further research, the method chosen by the author got some criticism. The criticsargue that it is inappropriate to rely solely on cash benefits when a welfare state also includesvarious social services such as science or medicine (Bambra, 2005; Dacko-Pikiewicz andWalancik, 2016; Štefko et al., 2017). Bambra conducted a study based on the EspingAndersen analysis, including health care services into research. After analyzing the same18 countries, it has been observed that some of them cannot be assigned to the traditionalthree models and they do form the separate subgroups. In this way, the author distinguishedfive models of welfare state: the Liberal, the Conservative, the Social democratic, the Liberaltype subgroup and the Conservative type subgroup.Further research has been conducted by the other authors as well. The typology byKorpi & Palme (1998) is based on the institutional characteristics of welfare state – the oldage pensions and sickness benefit programs. The authors investigate the institutional structureof these programs based on several aspects: What is the basis of citizen's right to receive benefits / pensions (i.e., based on theneed, contributions, citizenship, membership of a certain professional category etc.); What should be the level of social insurance benefits that would replace lost income(the minimum level, the same level or based on income received); How the social insurance program is regulated (i.e., whether employers and employeescollaborate in managing the program).Five possible welfare state models of the welfare state – the Target, the Corporate, theBasic protection, the Encompassing and the Voluntary subsidized – have been distinguishedbased on the aspects above (Korpi & Palme, 1998). No countries have been assigned to thefifth theoretical model, therefore, it will not be discussed in more detail in this paper. Theauthors pointed out that in the Target model countries, the social benefits are based on theneed and are only paid for the poor or disadvantaged, while the state almost does not interfere.In the countries of the Basic protection welfare model, the right to social assistance isbased on the contributions paid or citizenship (place of residence). In these countries, as in thecase of the target model, the role of the state is modest and the market is left free to act. Thus,it could be assumed that the Target and the Basic protection models in Korpi & PalmeEconomics & Sociology, Vol. 11, No. 1, 2018
Agne Lauzadyte-Tutliene,Tomas Balezentis, Egle Goculenko103ISSN 2071-789XRECENT ISSUES IN ECONOMIC DEVELOPMENTclassification correspond to the Liberal model distinguishes by Esping-Andersen. However,Korpi & Palme the study shows that Esping-Andersen‘s classification was inaccurate, i.e. theauthor erred in defining the different welfare models as one.The Corporate model highlights the cooperation between the employees andemployers in the management of social policy, and therefore entitlement to benefits dependson paid contributions and employment, i.e. the principle of merit is applicable (Korpi &Palme, 1998). Due to the major attention to economically active individuals and stratificationof the society based on employment, this model resembles the Conservative-corporatist typeof welfare state distinguished by Esping-Andersen.In the countries of the fourth, Encompassing, model, the right to social protection isbased on contributions and citizenship, so all citizens have equal rights to participate in thesame programs (Korpi & Palme, 1998). In the countries of the Encompassing modelinequality is minimum and distribution of income is maximum, it can therefore be said that itcomplies with the Social-democratic model of Esping-Andersen.The second argument of the critics as to why the Esping-Andersen model isinaccurate, is that the nature and diversity of the countries selected for the model maydetermine inappropriate classification of the countries (Arts & Gelissen, 2003; Rhodes, 1996).The critics pointed out that Esping-Andersen did not attribute South European countries to aseparate Mediterranean or South-European model, but rather opted for one country from thisregion – Italy – and attributed it to the Conservative-corporatist welfare state (Saint-Arnaud &Bernard, 2003). It is recognized that although the Conservative-corporatist and Mediterraneanmodels are quite similar, there are several fundamental differences between them.Saint-Arnaud & Bernard (2003) note that in the Latin welfare states the administrativeexpenditure of the public sector is more limited than in the conservative states, but is higherthan in the Liberal type states. Their research revealed that in the Latin welfare states,compared to Liberal, Social- democratic and Conservative welfare states, least investment ismade into health care, education and vocational training. These states can be characterized byhigh level of unemployment, which among women is higher even than in the Conservativewelfare states.Rhodes (1996) points out that the distribution of income in the Mediterranean stateshas frequently been determined by pressure from influence groups, meanwhile corruptionwhich exists in these states increases the gap between the rich and the poor. The authorfurther notes that clientelism reduces the effectiveness of the government sector and increasesundisciplined spending (Androniceanu, Popescu CR, 2017). Due to such situation, incomeinequality in the Mediterranean countries is high.Sapir (2006) also agrees with the existence of the Mediterranean welfare state model.The author identifies four welfare state models: Nordic, Anglo-Saxon, Continental andMediterranean. The Nordic model identified by Sapir (2006) coincides with EspingAndersen’s Social-democratic model, because expenditure for social protection in thecountries of this model is the highest and there is an active policy of reducing unemployment.In the Anglo-Saxon countries social assistance is provided as the last resort, therefore themodel may be equivalent to the Liberal welfare state model. In the Continental welfare statemodel great attention is paid to unemployment benefits and old age pensions, therefore, thismodel could be linked to Esping-Andersen’s Conservative-corporatist model.According to Sapir (2006), the Mediterranean welfare states focus their socialspending on old age pensions, which is the characteristic of the Conservative-corporatistwelfare state model. However, the author notes that the redistribution of income in order toreduce income inequality and poverty is the smallest in the Mediterranean states comparedwith other models examined by the author. In addition, these states maintain high levels ofEconomics & Sociology, Vol. 11, No. 1, 2018
Agne Lauzadyte-Tutliene,Tomas Balezentis, Egle Goculenko104ISSN 2071-789XRECENT ISSUES IN ECONOMIC DEVELOPMENTemployment protection and quite low benefits to the unemployed (Sapir, 2006; Soede et al.,2004).Esping-Andersen did not include Central and Eastern European countries in hisresearch either, so in this respect the classification of welfare states could have beeninaccurate. It is quite difficult to allocate the countries of this region to a single model,because they differ from one another (Fenger, 2007). Some countries have advancedconsiderably and are members of the European Union, while others are still in a transitionalperiod.The analysis carried out by McMenamin (2003) has showed that in addition to theSocial-democratic, Liberal and Conservative models, there is the East-Central Europeanwelfare state model. According to the author, these states differ considerably in terms of theirpolitical characteristics. The Czech Republic, Hungary and Poland are classic examples ofdemocracy, as one-party governments in these countries are rare and the coalitions in powerare vivid. However, pluralistic rather than corporate interest groups dominate. Each of thesecountries are fairly centralized, but have independent central banks. The majority of themeasures are aimed at the generous welfare that reduces the importance of the market andputs the state before the market.Still, social transfers in the Eastern-Central European countries are quite small(McMenamin, 2003). There is greater gender discrimination in these countries as women areless included, their employment levels are lower and there are gender pay gaps. The authornotes high social insurance contribution rates for employers as one of the most prominentfeatures in these welfare states. McMenamin’s research has revealed that the industrial sectorin the East Central European countries is more developed, creates more jobs and added valuethan the services sector. The author observes that the importance and development of theagricultural sector differ across these countries and there are huge differences in this area.Fenger (2007) included more countries in his research and found that EasternEuropean countries differ from other countries and can form a separate welfare state mode(Becerra-Alonso et al., 2016). The cluster analysis performed by the author showed thatEastern European countries should be attributed to a separate welfare state model, whichcould be subdivided into three types: former USSR, post-Communist-European anddeveloping welfare states.According to Fenger (2007), in terms of government spending the former USSRcountries could be attributed to the Conservative type, yet all other variables of thegovernment programs analyzed by the author fall behind those of the Western Europeancountries. The author identifies high levels of mistrust and differences in the variables of thesocial situation examined by the author (income inequalities, women involvement, GDPgrowth, inflation and demographic indicators) as essential differences between the formerUSSR countries and countries of other types.Soede et al. (2004) admit that there are more than three models of the welfare stateand identify five models: Scandinavian, Continental, Anglo-Saxon, Mediterranean andEastern European region. Based on the analysis carried out by the authors, unemploymentbenefits, disability allowances, allowances for children and pensions are considerably lowerin the Eastern European countries than in other European countries. However, governmentrevenues in these countries are also smaller thus limiting provision of adequate socialassistance to the population. East European countries mostly rely on the contribution-basedpension system, due to which pensions may decrease, if the governments are not able tomanage the public sector finances (Novickytė, Rabikauskaitė, 2017).Summarizing the literature review it could be noted that the inclusion of broader rangeof European countries into the study and choosing appropriate indicators makes it possible todistinguish more than three classic welfare state models. Thus, the investigation of the welfareEconomics & Sociology, Vol. 11, No. 1, 2018
Agne Lauzadyte-Tutliene,Tomas Balezentis, Egle Goculenko105ISSN 2071-789XRECENT ISSUES IN ECONOMIC
Keywords: welfare state, Eastern Europe welfare model, Central Europe welfare model. Introduction Investigation of the welfare state as a phenomenon began in the middle of the 20th century, however, quality of life remai
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