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Economics Essay Example: Welfare Systems in European Countries

4 pages
995 words
Vanderbilt University
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The financing burden has however made hiring workers to be an expensive affair that the counterparts in the emerging markets and while companies incur taxes to relocate the areas with favorable tax regimes (Himmelweit & Land 2011). Some have urged that the reasons that affect the European countries have been the public debt that is incurred by the inexorable demands of the welfare state, because of fear of backlash from voters when the politicians try to cut the welfare provisions, thus making them reluctant to reduce welfare budgets and raising taxes. Therefore they are known to prefer to borrow, hence increasing the debt levels and even when the economy grows, there is less demand for welfare payment and tax revenue remain buoyant. Therefore, even with an increase in GDP, the economy still carries a high level of debt (Giddens 2013).

While the criticism remains valid regarding the welfare states, a balance should be reached while addressing issues regarding its sustainability and effectiveness while dealing with social risks. Three functions are critical to understanding this concept (Bonoli & Natali 2011). The first purpose is offering an institutionalized means of saving the population because a majority of the Europeans have become accustomed making contributions to the welfare system during their working life, and draw from the system as pensions during their old age. Second, through the welfare system, the economic resources are distributed in various ways, for instance, the tax system takes less money from the poor and more from the rich (Andreotti & Mingione 2016). The effect is also achieved through public services through sharing of risks between the vulnerable and secure people as in the case of universal healthcare. This concept of redistribution has been described as Robin Hood a famous historical character that took from the rich and gave it to the poor (Harring 2014). These two functions highlight that welfare states can be utilized to deal with some challenges. In the world today, the labor mobility is becoming essential, and families are becoming dispersed, but they might still share income, but care is less practical (Giddens 2013).

The other function has been investing the capabilities of the people and the society as a whole. Welfare states provide free primary education to all children, and it gives substantial discounts in higher education (Bonoli & Natali 2011). A state has a role of providing primary education, but the Europeans states have allocated a growing share of the budget to other social investments that have gone beyond educating the children. The most important motivation behind these policies has been enhanced child-care and increasing opportunities for further education among adults hence ensuring that labor is adequately supplied (Harring 2014). The social investment function is boosting the human capital of the population and therefore does not undermine competitiveness as it may be expected because it offsets employability and productivity of its workers. Education is vital in elevating poverty among the poor in the society, and through welfare states, a majority of the individuals have access to jobs among other opportunities that improve their quality of life (Cassiers & Kesteloot 2012).

Welfare systems have been designed to ensure that people maintain their lifestyle as they have been accustomed to when they become old and sick, among other reasons that make them unable to work either temporality or permanently and hence affecting their ability to provide for their families. Individuals can continue participating in the market but at the same time strengthen the political society as well as the social fabric (Bonoli & Natali 2011). In many countries in Europe, this strategy has been achieved through the availability of public insurance schemes (Giddens 2013). The mandatory deductions paid to the insurance fund are made by the employees and the contributions by the employers and the government. These resources, based on the level and the number of years one has contributed, they earn credits that entitle the individual to the particular level of benefits cover unemployment, sick pay and old age pensions, which are all factors that ensure equality in the European states (Cassiers & Kesteloot 2012).

The research regarding the correlation between state size and trust argue that universal welfare policies create confidence, but the opposite is also true in the case that the high levels of trust immediate a moral hazard hence creating a free-rider problem (Cassiers & Kesteloot 2012). Countries with high levels of trust, for instance, Denmark and Sweden achieve better outcomes in several dimensions for instance economic growth and quality of governance. Trust aids the society in reaching cooperative results (Giddens 2013). Some scholars argue that trust leads to lower levels of corruption because corrupt policies are known to reduce the efficiency of the redistributive policies. Impartiality of the universal welfare states can lead people to infer that a majority of individuals can be trusted and this was creating a confident and dynamic welfare state (Bonoli & Natali 2011). Countries that utilize the Nordic model have demonstrated high levels of trust with public services, and it evident that the level of inequality among its citizens is considerably low. It is essential to put in mind that, as the world advances, the moral aspects continue to be taken seriously. When people have a firm belief in the existing government systems, the welfare state becomes bigger because the social insurance systems result in lower equality regarding disposable income (Andreotti & Mingione 2016).

Globalization affects developing and the developed countries in different dimensions. The Economies of Europe have been facing an influx of people as a result of immigration (Andreotti & Mingione 2016). However, studies indicate that this influx would have a minimum impact on social welfare because with time they become absorbed into the job market and they begin contributing to the social welfare schemes. The government also plays a crucial role in ensuring that there is the collaboration rather than competition with other actors (Giddens 2013). For instance, countries such as Norway and Germany export their products to states such as the United Kingdom and the United States. Over-dependence on exports can, however, res...

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