How to stay at the top? Three challenges facing the Nordic welfare model

The Nordic countries regularly rank at the top of international comparisons that measure equality, freedom, security and democracy. At the same time, these countries are considering how well the welfare model can withstand global challenges.

According to a broad range of indicators, the Nordic countries are faring well. They rank at the top of international comparisons measuring, among other factors, happiness, gender parity, income distribution, human freedom and press freedom, as well as the rule of law. Other countries are looking to the Nordics to find out the reasons for this.

“Interest in the Nordic countries is at its highest level in a long while, partly thanks to international comparisons where they rank at the top. Nordic universalism and related experiments, such as that carried out on universal income in Finland, provoke interest,” says Helena Blomberg-Kroll, professor of social work and social policy at the Swedish School of Social Science, University of Helsinki.

Universalism denotes the equal right of citizens to social security and social services, such as education as well as social welfare and healthcare services. Certain social rights are guaranteed free of charge by the state for its citizens.

Observing the situation from within the Nordic countries offers an entirely different view. Instead of success, there is frequent talk about a crisis of the welfare state.

Societies are not static. The Nordic countries also face global challenges, such as polarisation, increasing inequality and populism. They put to the test the social, economic and ecological resilience of the welfare model, that is to say its ability to recover from or tolerate disruptions. In other words, the question is how well the welfare state is able to function in the long term regardless of challenges.

For Nordic welfare societies to survive, they must evolve and adapt to changes in their surroundings. Researchers have listed three big challenges in need of resolution.

Ageing population

The ageing of the population presents a challenge to all Nordic countries. Ageing populations lead to higher public spending and lower tax revenues, something which has an impact on the funding base of the entire welfare system.

Finland in particular is struggling with demographic changes. The country’s birth rate is decreasing, whereas in Norway and Sweden it is sustained by immigration.

Pauli Kettunen, professor of political history at the University of Helsinki, points out that it is difficult to discuss reforms of social welfare and healthcare services, social security and professional life, or policies concerning families, immigration and integration, without considering population ageing and the decreasing share of working-age people and children.

“However, attention should also be paid to how changes are defined as problems in the related discourse and what kinds of concepts are used to describe them.”

Kettunen notes that ‘dependency ratio’ and ‘sustainability gap’ are terms often heard in the public discourse. Speaking in these terms, it is easy to forget that the determination of problems and solutions is inextricably linked with political choices. When ageing people are perceived as a threat to the sustainability of the national economy or as an opportunity for lucrative service business, this also impacts the experiences of elderly people and how they are treated.

“Socially sustainable Nordic welfare states should invest in both the flexibility of family policies and professional life as well as in improving elderly care. What poses a challenge is that social sustainability may be in conflict with economic sustainability,” says Blomberg-Kroll.

Ecological sustainability is also a requirement that these days permeates all political sectors. The borders of nation states hinder the reconciliation of social, economic and ecological sustainability, while national welfare policies have to be integrated with European and global collaboration. For the welfare state to keep providing its welfare services, this equation must be solved in one way or another.

Individualisation of weakness stemming from the transformation of work

At the time of the establishment of the welfare state, notions of weakness and protecting the weak changed. In terms of past support for the poor, weakness was associated with the physical, mental and moral deficiencies of individuals, such as being a child, an elderly or ill person, a woman, or an alcoholic, characteristics that justified the patronage, protection or punishment of such people.

The welfare state was founded on the identification of the relationship between the weak and the strong in societal structures, particularly those related to work. The definition of protecting those in a weaker position came to encompass the levelling out of structural subordination and promoting equal citizenship through social welfare and educational policies as well as a system of agreements concluded within the labour market. From the 1950s to the 1970s, this trend prevailed, but now the tide is turning.

Work has always occupied a key role in the Nordic welfare model, and the labour movement was a significant contributor in building the welfare state. The establishment of the welfare state promoted the formation of the wage labour society. Protecting the weak entailed the strengthening of workers’ status in the labour market and at the workplace, maintaining and improving the ability to work as well as protecting livelihoods in situations where people were unable to sell their labour. Labour relations are still heavily regulated with collective agreements concluded between employers and unions.

“However, it has once more become easier to reinstate weakness as a quality of the individual in the form of people’s insufficient competitiveness,” Kettunen says.

The way we work is undergoing transformation. Many people fluctuate between a range of statuses during their lives, including those of an employee, entrepreneur, self-employed person, accumulator of personal skills and an unemployed person. This is why structural weakness is difficult to recognise and level out with current protective methods, such as unemployment benefits based on paid employment. Changes in working life have intensified the competition for jobs and weakened a central method for protecting the weak used by the trade union movement, namely the restriction of competition by levelling out structural inequality.

“Individualising weakness does not, however, prevent us from acknowledging that those in a weaker position need protection,” Kettunen states.

In the Nordic countries, incentives and obligations are used in varying ways to influence individual behaviour. In Finland, for instance, a controversial activation model for unemployment security was introduced. A common trend in all countries is the current focus on individual behaviour.

According to researchers, the combined effect of the individualisation of weakness and the changes to professional life are producing winners and losers, as well as those unable to take part at all. 

Finding sustainable solutions

The establishment of the Nordic welfare state was supported by a widely shared trust in the ability of society to bring about self-supporting cycles of benefits and goals through compromise and planning. This kind of positive cycle linked together objectives associated with social equality, economic growth and expanding democracy. The strengthening of one sector also boosted the others: for example, the education and healthcare provided for all citizens through tax revenues produced a skilled and healthy workforce for the labour market. A growing economy, in turn, increased tax revenues.

Now that the economy, labour market and governance have become global, reconciling the traditional objectives of national welfare states has become increasingly challenging – especially with the addition of global challenges relating to the environment and climate, as well as the global mobility of people.

As the movement of money, information, jobs and people across state borders has increased, the politics of nation states have come to emphasise improving the competitiveness of society. National competitiveness increasingly frames political agendas, while welfare states also shape society into an attractive environment for players in the global economy.

“Confidence in good goals fitting together, typical of the welfare state, may be problematic. In this global equation, this confidence may turn into an assumption according to which goals are good if they align with the goal of competitiveness,” Kettunen says.

What Kettunen means is that even if a solution promotes the competitiveness of a country, it may no longer be socially or ecologically sustainable. A solution to a problem may engender new problems with unforeseen consequences, disrupting the birth of positive cycles in the future.

“Even good answers to questions of national competitiveness are insufficient for the purposes of those pertaining to democracy, citizenship, social equality and the ecological preconditions of life. With increasing frequency these questions are simultaneously local, national, European and global,” says Kettunen.

Everyone is defending the welfare state – a concept with many meanings

The Nordic welfare states are facing the same devilish and complex challenges as other welfare systems. Professor Blomberg-Kroll emphasises that society has a duty to change and adapt over time. Political choices determine how it is done.

“The Nordic countries have shared certain goals and values inherent to the Nordic ‘ideal model’: equality, a certain type of universalism and the central role of work. Over time, values and goals have changed within and between these countries, but they form a shared foundation,” Blomberg-Kroll says.

“Challenges related to the ageing of populations are clearly great, and the revolution of work and the labour market are equally plain to see. What we need are changes to services and the social security system.”

Is it possible to make such changes while fostering the values on which the Nordic welfare model has traditionally rested?

“Many studies indicate that the values of the Nordic model enjoy broad support among the public. Indeed, the question is whether they will also be supported by politicians in the future,” Blomberg-Kroll notes.

According to Kettunen, this support seems strong, at least in terms of political rhetoric.

“No political party in the Nordic countries can expect to gain wide support by declaring to aim for the demolition of the welfare state,” he says.

How politicians define the welfare state is another matter entirely. Kettunen believes a wide spectrum of arguments are based on preserving the welfare state.

“When representatives of business life are demanding improvements in competitiveness, they offer the preservation of the welfare state as justification. The same applies to the officials of the Ministry of Finance in terms of reining in national spending, while neoliberal demands for extending market economy practices to the public sector are also supported by claiming this to be the way to save the welfare state.”

The same argument is also employed by those invoking xenophobic threat scenarios and striving to close the borders, as Nordic right-wing populist parties consider themselves to be defenders of the welfare state.

By the same token, social democrats and its other traditional defenders are eager to justify the welfare state as an economic competitive advantage. Social security and public services are perceived as social investments, as well as tools of risk sharing and management.

“Preserving the welfare state appears to be both an end that justifies the means and a means that justifies the end. It’s important to critically assess what is being preserved and how, and how the methods used will change and potentially even erode the welfare state,” Kettunen says.