Asia Institute Seminar with Dr. Eckhard Schroeter: “Korean Social Welfare in Comparative Perspective”

Asia Institute Seminar

“Korean Social Welfare in Comparative Perspective”

 

Dr. Eckhard Schroeter

Professor

Chair of Public Administration 

Zeppelin Universität 

 

August 28, 2012

Emanuel Pastreich:

Should government be entirely responsible for the social well being of the individual, should responsibility be split with employees? Should individuals be responsible for themselves? Where exactly do you see the funding coming from that will cover expenses like medical treatment? Will you just tax the people more? Will you tax corporations more? If you just tax the people more, the problem is not really solved, especially if the political system is such that such expenses are passed on to the poorer members of our society. If you tax corporations, they can just pass that cost on to people and adopt new policies to protect themselves. As long as corporations have a high level of influence, it is quite difficult to change the situation indeed. What do you think?

Eckhard Schroeter:

I strongly believe in the principle of subsidiary (belonging to the larger whole) in policy. Individuals and smaller and lower-level groups and organizations are our immediate points of reference. Above them are larger collectives and above that is the nation, or welfare state, that can step in when required. We should look at welfare policies as an essential approach to risk management in the fact of the vicissitudes of life. We are subject to multiple risks in the course of a lifetime to our health and our well being. We all are at risk. In today’s complex world, the stakes associated with those risks are so high that we need to rely on larger collectives to socialize our risk management. The approach is extremely practical and understandable to anyone.

In Germany’s welfare system, occupational groups have traditionally served as these large collectives to protect the individual. Workers and their employers contributed equally with their monthly premiums to pay for the cost of healthcare, unemployment insurance and pension plans. These insurance funds are run in a transparent manner in accordance with public law, but they are managed at arm’s length from government. Government provides the regulatory framework to make insurance programs mandatory to make sure everyone is covered, and to set specific service levels. However, government does not have a direct hand in the provision of many social services: doctors, hospitals, care facilities and the like are run by private companies or non-for-profit organizations. Particularly, in the provision of personal social service the non-for-profit sector and voluntary associations play a very strong role in the German case.,

Interestingly, North Americans and Europeans pay roughly the same percentage of their income for social insurance plans – only to very different institutions (private insurance companies in the case of the United States and government agencies in the case of Europe). Welfare services will have their price tag in any case, whether we trust government, or businesses, more to provide those services. In a sense welfare comes down to a matter of trust and of power relations in any given society.

Emanuel Pastreich:

Why is it exactly that political parties do not represent the concerns of average people today? Why is it that we have such a gap, an inability, in the political system to represent the needs of ordinary people with regards to social welfare?

Eckhard Schroeter:

Well I would not want to leap to the conclusion that political parties do not represent people’s interests, and I would want to identify who exactly are those ordinary and average people we are talking about. As with all public policies, welfare policies reflect the relative power of political actors quite directly. We can see the results of electoral competition and politics clearly in welfare policy.

Of course, it is also important to understand the national and cultural setting within which political parties operate in order to address how they respond to social welfare issues. Last but not least, we must not blind ourselves to changes in the political and economic environment that are constantly taking place and that change the entire welfare environment. The political allegiances of voters have shifted often to the right in many nations, and it is certainly true that soaring government debt and budget deficits have made nations states poorer (and have increasingly shifted the burden to future generations). All these factors are exacerbated by pressure from international economic competition and the overall weakening of organized labor has had a negative impact on wages and benefits.

In spite of all these factors, the welfare state as we see it in Germany, has shown a great deal of stability and continuity. The welfare state persists and retrenchment in terms of its basic social role has been rather limited. Also, there is no reason to be naïve about the value of established welfare states in the political realm. All entitlement programs automatically create their own constituencies who will defend them. That is true not only on the receiving end, but also on the part of the providers and “producers” of welfare service, i.e. large welfare bureaucracies.

Emanuel Pastreich:

Can you give some more concrete details of how the problem of an aging society and the social burdens on families can be addressed? What are some effective approaches? Do give a bit of detail: Specifically in Germany.

Eckhard Schroeter:

We find a mixed bag of approaches for dealing with an aging society in Germany. We see efforts to extend welfare state services to people and also we find examples of a (partial) retrenchment from full-fledged welfare systems. For example, Germany has introduced a mandatory long-term care insurance program (which requires contributions from employers and employees) thus adding to the already high burden of financing the welfare system for citizens. This is an example of expanding the role of the welfare state. More in the line with a cutback in services, however, is the move to push the legal retirement age gradually back from 65 to 67 years and to lower replacement levels. At the same time, people are encouraged (by government subsidies) to buy pension plans from private insurance companies.

An aging society, however, calls for a change of socio-cultural patterns of behavior more generally. We have to reconceive of our lives and our expectations as part of the process—we cannot focus merely on the financial issues. There will be a need for life-long learning as life-expectancy increases. So also there will be a need for new health programs to meet the needs of an aging workforce.

And then we need to be creative concerning new lifestyles for seniors. How can we house them in more human environments and still guarantee them care? How can we get volunteers and family members to devote the time to do required community service? Well it requires a real shift in values and priorities.

In Germany, as a matter of fact, more than 35.000 people enlisted for the first year of the newly-introduced “federal volunteer service” (2011) which provides rather marginal financial compensation for work in social institutions. Those efforts were clearly not just about money.

Emanuel Pastreich:

How about the problem of women and social welfare, we see in Korea a failure government and business to address the massive shift in Korean society as women work more. Tell us about the German role. Has government kept up with this massive change? What problems do we see?

Eckhard Schroeter:

Traditionally, the German welfare system was designed so as to serve the conservative model of a single male-breadwinner family. However, the system has significantly moved toward a more flexible model that takes into consideration the needs and concerns of working women. The introduction of parental leave, which allows both mothers or fathers to take time-off from work to be with their children, is the latest point in case. Germany has given the question some thought.

However, there remain two massive problems: equal pay for women is still far from being a reality in Germany, making it rather difficult for women to serve as primary breadwinners. At the same time, despite improvements, child care is still very difficult to manage, and still too expensive for women. The barriers to a career for women that result are immense.

Emanuel Pastreich:

Can you explain in a bit more detail about the question of public housing. How big a responsibility does government have for building housing, for those who cannot afford housing? What should be done? What is German policy on public housing, on helping citizens with housing? What is the general state of the EU?

Eckhard Schroeter:

At present there is no pan-European policy towards public housing and assuring the opportunity to have access to housing. Germany falls into the category of countries that rely heavily, but not exclusively, on private-sector investors and developers to provide housing generally in the real estate market. This policy stands in contrast to countries, like the United Kingdom, for example, in which the public sector plays a dominant role providing public housing. Germany’s public authorities at the federal, regional, and local levels, however, remain very committed to “socially integrated cities” in which we do not find the segregation and polarization on the basis of income, or of race, that can cause serious social problems.

Still, government in Germany does not employ a heavy hand, or enter directly into the market in terms of the direct provision of social housing. Most importantly, housing benefits are provided specifically so as to give low-income groups access to the housing market, rather than defying market principles. For many years, Germany used time-limited subsidy arrangements – in exchange for rent restrictions – to provide affordable housing. Those federal programs, however, have phased out. As of today, the initiative for public housing lies with local governments that, for example, may require private investors to include a certain number of affordable housing.

Emanuel Pastreich:

How can we control speculation in real estate that causes so many problems for average people?

Eckhard Schroeter:

In Germany, the rate of owner occupation is comparatively low, particularly in cities and metropolitan areas. This is also a function of the relatively strictly regulated housing market in Germany. And tenants enjoy strong rights vis-à-vis owners in Germany as well.

Also, there is a long-established tradition of shared ownership through co-operatives and housing associations in Germany that helps mitigate the repercussions of the real estate market. There is a general sense of housing as being for living, not speculation. In addition, there has not been an overheated property market as epitomized by the “housing bubbles” in the US or in Spain. As with the development of the private rental housing market, local government can employ their own land to stem the tide of market pressures.

Emanuel Pastreich:

Give us some details of the problem of creating jobs through government actions in the Germany.  What exactly is the problem today and what approach do you think might work as a solution—especially for young people?

Eckhard Schroeter:

Currently, Germany’s youth unemployment rate is among the lowest in Europe. Part of the reason is the booming export-oriented economy in Germany and declining numbers of youth who drop out of school as a result of demographic changes. A key component of any success story involving bringing young people into the work force, however, is training and the employability of the youth. The German way of handling training and specialized knowledge is the time-honored system apprenticeships. We have a dual system wherein training-on-the-job paid for by qualified employers is combined with vocational training in schools that is provided by local government. After school, roughly 60 per cent of all graduates opt for this model. It is specifically geared to cater to the needs of German industry and is the result of a close cooperation between employers, trade unions and government. That sort of cooperation might be an approach for Korea as well.

Emanuel Pastreich:

As German society ages, we see more reliance on immigration to support society. What do you think about this strategy?  What policies to make Germany more multicultural are being pursued?

Eckhard Schroeter:

German society today is already very multicultural after decades of labor migration and influx of humanitarian refugees and asylum seekers. However, most Germans and their policy-makers have not yet embraced the notion of Germany as a “country of immigration”. Consequently, policy changes can be labeled as “too little, too late”.   In individual cases, however, those changes can be quite substantial. We have seen the adoption of a new citizenship law making the naturalization of immigrants much faster and easier.

More importantly, increased flows of migration will not come to the rescue of financially ailing social insurance plans – no matter how much we try. The mobility of highly-qualified workers, professionals and academics, however, is likely to help filling the many vacancies that will be opening up soon when more and more members of the ‘baby boomers’ generation start to retire. It is to this end that most policies are geared to: bringing in more international students, allowing them to stay in the country after their graduation, making it easier to get a work and residence permit for well-trained job candidates from abroad, and accepting more readily foreign degrees and diplomas for professional work in Germany.

Emanuel Pastreich:

What is the thinking in Germany about using massive public spending to create jobs and help the economy?

Eckhard Schroeter:

Printing money to throw at economic problems does not bode well with public sentiments in Germany. Inflation has been a traumatic experience in the nation’s collective memory as we know from the 1920s. For the better part of Germany’s post-war history, federal government has taken more of an ‘ordo-liberal’ (Ordoliberalism is a German variant of neoliberalism that emphasises the need for the state to ensure that the free market produces results close to its theoretical potential) stance, making sure that the regulatory setting right for a competitive business environment.

Having said that, Germany had its own stimulus package after the financial crisis, 눌 bailed-out ‘system-relevant’ banks and introduced a ‘cash-for-clunkers’ program to help the then ailing car industry. And yet, these examplesr remains as exceptions that prove the rule.

Emanuel Pastreich:

Tell us something about Germany’s job sharing programs. How do they work? Can they be a model for other countries?

Eckhard Schroeter:

What you refer to as a “job-sharing” program, is known in Germany as a “short-work” program – a program designed to prevent lay-offs when there is a temporary drop in demand. The program is an integral part of the mandatory unemployment insurance scheme (to which employers and employees contribute equally) run by the federal employment agency. Rather than making workers redundant, their hours are reduced by 10 per cent or more for a limited period of time during financial difficulties. The government agency will compensate workers for 60 per cent of their lost salary for up to six months. However, the time limit set by the program is typically extended in times of exceptionally deep recessions (e.g. in the wake of the financial crisis) to up to 24 months. The program has advantages for both employers and employers: workers will see their income (moderately) reduced, but they are still on the pay-roll and enjoy benefits; industry can hold-on to skilled workers and will hit the ground running once the economy kicks-in again. Clearly, the program can serve as a role model for other countries.

Emanuel Pastreich:

What are we to make of the crisis with debt and with pensions in Europe today? Are we hearing the full story? What is going on and what are the implications for the rest of the world?

Eckhard Schroeter:

There is no such thing as the one full story. The world is hearing much more and much less at the same time. There are always many narratives in which a storyline can be told. The currently prevailing narrative reflects to a large extent the perspective of financial markets – and powerful actors in these markets from outside the Eurozone. The focus is on government debts and budget deficits – despite the fact that European nations do rather well on both accounts in international comparison. Of course, I do not want to belittle the immense challenges of public finances in European nations. The “framing” of these problems, however, is in itself part of the problem.

In reality, the challenge of currency is related to governance problems in the Eurozone and the European Union. The single currency is, of course, just as much, if not more so, a political project as it is an economic project. As a matter of fact, European integration might be deepened and intensified as a result of the current crisis — and Europe might emerge stronger from it.

Returning to the question of welfare more specifically, we should also be quick to mention that Germany’s health care and pension funds, for example, currently enjoy big operating surpluses.

One response to “Asia Institute Seminar with Dr. Eckhard Schroeter: “Korean Social Welfare in Comparative Perspective”

  1. Pingback: Korean Gender Reader | The Grand Narrative

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