“Investment instead of insurance”

A reform of the pension system was put to a referendum recently. Why was the proposal rejected?

Häusermann: A reform that decreases retirement benefits is an incredibly hard sell in politics, because nearly everyone thinks they will be negatively affected. Nevertheless, 47 percent of voters were in favor of the reform package in the referendum on 24 September. I’m afraid that in the future we will again see how difficult it is to even get this amount of agreement, for example for the lowering of the conversion rate or the increase of the pension age.

One reason for the referendum failure was also a partial alliance between the left and the right – with very different interests. Who really won in the end?

Häusermann: Nobody. No-one can claim this referendum as a victory because neither side got nearer to their goals. There are actually only losers. The failure also demonstrates the huge polarization currently at play in Swiss politics. Competition between the parties has changed considerably in the last 20 years – there has been a shift away from consensus democracy. Up until the early 2000s, social policy proposals, while facing lengthy debates in parliament, were normally eventually agreed by most parties and therefore the public usually voted in favor – if the issue even required a referendum. In the current system, these necessary, broad coalitions are hardly ever possible.

So is social policy-making becoming more difficult due to the polarization?

Häusermann: Exactly. A reform to safeguard pensions needs broad support from the parties, from the right-wing of social democracy to the left-wing of social liberalism. At the moment it doesn’t look likely that such coalitions will be formed. After the failed corporate tax reform and the failed pension reform, however, awareness is growing in politics that this polarization is damaging the country’s ability to reform. It makes pension reforms, which are always going to be difficult, even harder to implement.

Does this tell us something about the attitude of people and politicians towards the welfare state?

Silja Häusermann: Surveys show that support for a generous welfare state in Switzerland is very high, as in all other countries. So there is a broad consensus. But what is on the current reform agenda is not expansion, but the financial underpinning. That either means a rollback in services, an increase in taxation, or a shift in priorities within the welfare state. These kinds of reforms are very hard to push through.

What are the current challenges facing the welfare state in Switzerland, as well as in Europe?

Häusermann: The main aim of the welfare state in Europe, established after the Second World War, is to insure income. For example, we pay salary contributions. In case of risk, the welfare state compensates us for loss of income with a financial transfer. For almost the last 20 years, there has been a strong political and intellectual shift towards no longer exclusively putting income replacement at the center of social politics, but taking also active political measures, i.e. investing. Social policy should enable, support, and improve employment chances. That means that in the future the welfare state needs to funnel more resources into promoting human capital – e.g. through education, childcare, and good working conditions. It needs to provide active social benefits instead of passive ones. This reorganization is in my opinion the central challenge facing today’s welfare state. Countries in Europe are at varying stages of progress in this regard.

How far ahead is Switzerland? Are we living in an insurance or in an investment state?

Häusermann: Switzerland is still predominantly an insurance state. State investment should not completely replace the principle of insurance. But in the field of employment, for example, Switzerland is very far ahead – particularly in unemployment insurance.

In what way?

Häusermann: For instance, over the last 20 years, regional job centers (Regionale Arbeitsvermittlungszentren – RAV) were introduced, i.e. active employment market measures.

Do these job centers actually do any good then?

Häusermann: The RAV centers are the best-evaluated social institutions in Switzerland, and they are continually adjusted accordingly. Evaluations show that they are very effective. We also know that states that are more focused on social investment have much higher employment rates than states that mainly insure their citizens financially.

Which countries are particularly successful?

Häusermann: The front-runners in social investment policies are the Scandinavian countries and the Netherlands. Their welfare states began focusing on promoting employment much earlier than others. The continental European countries have been moving in this direction for the last 20 years, but with varying speeds because it requires considerable effort, and a reorganization from insurance to investment is politically difficult if the overall budget is limited. It has been hardest for the welfare states in southern Europe to achieve even small steps in this direction.

In your view, Switzerland has made positive developments in investment policies in terms of the employment market. In which areas do we still need to catch up?

Häusermann: Certainly in policies relating to families. This is an area in which Switzerland deviates the most from developments made in other European welfare states. Locally, in a few cities, a good range of childcare facilities have sprung up in recent years, but overall childcare services are much less developed than in neighboring countries, even in the cities, and are also much more expensive. As a result, many mothers work part-time for relatively few hours a week, and childcare outside the family is mainly used by people with higher incomes.

Political debate in the area of family policies is marked by very strong ideological positions. What’s the reason for that?

Häusermann: That’s an interesting aspect. In general, social policy-making always involves conflict about the distribution of financial resources. Certain areas of the welfare state, however – including family policies – don’t just have this distribution aspect, but are also strongly connected with personal values. So the debate is really about the roles of men and women, about investment in education, and about societal changes in general. Research has shown that citizens’ attitudes towards family policies have far more socio-political and cultural connotations than their attitudes towards unemployment insurance or pensions, for example. This is also the case with attitudes towards women’s and minority rights, migration issues, or the international opening up or isolation of Switzerland – i.e. topics that have little to do with the welfare state. Thus social policy becomes polarized on a quasi socio-political level. That’s why issues relating to family policies are so controversial in Switzerland.

Are they part of the cultural tug of war between conservatives and progressives?

Häusermann: Exactly. In family policy-making, there is a conflict between various ideas of how society should function: Whether it should continue to open up, modernize, and change, or whether stronger measures should be taken to preserve tradition.

Education policy has also become a controversial topic recently. Why is that?

Häusermann: No-one is against education – the people and all the parties support investment in education, and there’s strong consensus on basic education policy issues.  But there are two areas in which this consensus does not apply: Opinion polls and political debates show early education and tertiary education to be controversial topics. These two areas of education are emblematic of the wider changes in society. For example, the massive expansion of tertiary education goes hand in hand with deindustrialization and the transformation into a service economy, as well as the increased participation of women in education and employment. These developments are part of a societal revolution which is experiencing considerable backlash at the moment.

Is the backlash coming from less-educated men and directed against well-educated women?

Häusermann: It’s not so clear cut as that, of course. But these two profiles – the less-educated men and the well-educated women – symbolize the winners and losers of the structural changes of the last 30 years. This structural change has led to a huge loss of jobs in industry and at the same time to an expansion of the service sector, and therefore a shift to more skilled jobs. In contrast to the service sector, in industrial sectors more men were employed than women. On top of that come the socio-political changes around traditional roles and family structures. These developments are not neutral, they produce winners and losers.

How do the losers react?

Häusermann: They defend themselves. If we compare the profile of national-conservative voters across different countries, we see that they are very homogeneous: They are often men working in industrial jobs who are generally less well-qualified. In other words, people who have very understandable reasons to feel threatened by the changing economy and society. What is important to note is that for these voters, the perceived threat posed by structural change is more significant than the extent to which they are actually affected. It’s more a question of recognition than material need.

Can the welfare state offer an answer to this polarization?

Häusermann: Yes, it can and must be part of the answer.

What could that answer be?

Häusermann: There are two basic possibilities: Either the status of the employee is safeguarded, for example with strong protection against dismissal. Or we use social investment to support people to find their way in a changed job market. This requires investment in human capital, continuing education, and an accessible education system. This second strategy is surely the better long-term solution, both socially and economically. In the short term, however, it doesn’t help much to calm people’s fears.

You mentioned investment in education. What specifically is needed?

Häusermann: I think that Switzerland has got many aspects right here. In the post-industrial society, it is essential that people are able to transfer between vocational training and tertiary education. Switzerland has invested strongly in developing this transferability in recent years, mainly through the universities of applied sciences. Somebody who does a vocational apprenticeship has plenty of opportunities for further development.

What are the effects of such investment?

Häusermann: It has a very direct effect, for instance on social inequality. In countries with vocational training and a good public education system, the widening inequality seen in the last 30 years is much less pronounced than in countries in which university education is privately funded and very stratified.

How does your research contribute to the further development of the welfare state?

Häusermann: I research how politics is changing as a result of structural changes in society: How the power relationships, interests, and strategies of the stakeholders change when the economy is radically restructured, the relationship between the sexes shifts, or education is expanded. I am currently working on a large project investigating the conditions under which social investment policies are implemented, and what might prevent them from being implemented. Our findings are relevant for politicians as they have to find a way to implement reforms in the context of this difficult constellation.

What about the pension reforms? It seems like it will be hard to achieve anything at the moment due to the strong polarization on the issue.

Häusermann: I'm not totally pessimistic. Many are now coming round to the view that it is necessary to find measures that have wider support. That means finding a compromise that will enable us to avoid a referendum battle like the one we’ve just experienced.

How does one find a sustainable consensus?

Häusermann: It takes compromise and persuasion. Let’s take the retirement age of 67, for example. Surveys show that 70 percent of people don’t want it. But at the same time, 70 percent also believe that the retirement age will have to be increased sooner or later. The job of the parties is now to bring both those positions together so that a majority will accept the proposal. It’s entirely possible – but the decisive question will be the willingness of the parties to compromise.