Social policy in conditions of globalization: experience of developed countries

This paper presents a research of social security in the context of global development in the era of globalization. Based on the research of the works of western scholars author found that in the last two decades in the west largely changed conceptual approach to social policy. The reforms of the social sphere are determined by the transformation of the social structure and economy, with special emphasis on the competitive aspect of development. According to the author, the experience of western countries provide important guidance for the formation of appropriate policy in Kazakhstan. 

The formation of state welfare of its people was a significant social achievement of world civilization of the XX century. The era of the state welfare actually reoriented vector of civilization, accompanied by attempts to revise the principles of socio-economic growth and the role of the state, the changing nature of the redistribution of national income.

According to the position of Western scholars, the main problem lies in the fact that since 1990s the state loses the former exercise to control over the movement of capital, which means that individual governments can not set interest rates at a level lower than the yield on the international financial markets. As a result of measures to stimulate economic activity by lowering interest rates, do not lead to the expected effect of the investment. However, monetary policy has lost its effectiveness as a means of ensuring full employment, because when interest rates rise any fiscal measures to stimulate the economy lead to an increase in debt. Industrialized governments that sought to combat with unemployment would have to carry out a coordinated turn to the «policy proposals.» The aim was to establish a productive investment for a minimum rate of return, higher than, which is provided in the international markets [1].

One of the main points in this scheme — something that is becoming more difficult to finance the «big social policy» for the necessary borrowing under the new conditions become more expensive as compared to the previous period, when governments have great potential to attract additional resources. At some point, these changes began to form a framework strategy to change the role and functions of the state in the economy and social development. This policy is aimed at the transformation of the model from the new context of interaction between the various sectoral and corporate interests, social partners and social groups. An important process is the change in the balance between the factors of production (capital and labor), that at the level of society is reflected in the strengthening of the positions of entrepreneurs and major government efforts aimed at improving the effectiveness of competition policy.

This policy is developed in two directions. On the one hand, to reduce costs and increase productivity of enterprises use the traditional approach of pressure on wages, tax cuts and social spending. On the other — of the new (global) context of competition state in Western countries actively contributes to the quality of factors of production by stimulating research programs, industrial policy, the introduction of new technologies, development of training programs.

However, the persistence of the international economic position actually «paid» a reduction in disposable income and total consumption (public and private). As a result, there was a situation when suffering a major factor of macroeconomic equilibrium. At the same time, if competition policy is ineffective, it leads to a deterioration of the trade balance and, therefore, reduces the level of national welfare. But also in the stabilization of the trade balance through monetary policy by encouraging interest rates increases the probability of bankruptcy of enterprises and job losses.

Consequently, the growing competition of countries with low production costs (especially with an abundance of cheap labor), developing in many industry fields, is becoming a factor reducing the wealth and employment in industrialized countries with high costs. At the same time, the rise in unemployment reduces the ability of the institutions of the welfare state to finance social spending.

Such is the logic of the basic paradigm, justifies the need for far-reaching reforms of the social sphere in the national interest. And this position is well represented in countries with different models of social policy, as Western Europe and the United States.

Meanwhile, a large model of social policy has demonstrated high stability. Although globalization has stimulated social and economic reforms in the Western countries, it has not led to a reduction in state social spending, because they continue to be implemented primarily by the schemes established in the preceding period.

According to specialists’ calculation, for the period 1970–1990s in the average share of social spending has increased everywhere in the 3–7 % and was higher in countries with greater centralization and state activity. Moreover, the growth of this index exceeded the level needed to compensate for the increase in the number of pensioners. In addition, in most industrialized countries has increased employment in the public sector, especially in countries with social democratic model to 20 % (an increase of 6.5 %) [2].

It’s necessary to take into consideration, that this approach is focused on the part of the global process, due, apparently, the development of expertise in the global economy. If we start from the quality of the factors of production, the Western countries have yet significant and long-term benefits associated with continuous information technology revolution and socio-economic policy, giving priority to increase investment and employment in technologically advanced industries. At the same time, however, there is a certain  social «fault» because the winners are highly qualified specialists. Others categories, in particular the massive layer of semi-skilled workers employed in traditional areas, in an open economy lose its stable. Hence, the likelihood of increased social and professional income differentiation.

During this period, there was an alternative point of view that in modern conditions the government receives a great opportunity to obtain loans with lower risk of rising interest rates and encourage capital outflows. The argument is logical enough, because in the global economy competition in the capital market should increase, which means that borrowing — to become cheaper [3]. It follows that not only decreased, and increased opportunities for large social policy. While the global financial crisis of 2008, worsening the debt problem, and hence the rise in interest rates significantly weakens this position.

Meanwhile, when considering issues of social policy must take into account the role of the most important institutional factor of globalization — multinational companies of the developed-countries. These structures have acquired a high degree of autonomy, their interests become dominant, they win, regardless of the nature of the transformation of international competition and largely influence the policy states. In addition, a large role is played by the institutions and mechanisms involved in the regulation of international trade conditions and activities in the interests of social welfare and well-being goals.

However, the development in the global economy for many countries can not be serious prospects without the formation of adequate institutions of international and regional social policy, to achieve the correction of income distribution between countries. Such a policy, in particular, is carried out in the EU through appropriate funds to support and alignment factors of socio-economic development [4]. EU experience shows that social policy, which is aimed at a more equitable distribution of assets and resources, is one of the most important factors of economic growth and technological progress.

Statement of social development issues in the context of international institutions — an important condition that can stimulate the growth of welfare throughout the world. However, this process is only in its infancy. At the same time, the role of global factors in the social policies of the industrialized countries is somewhat exaggerated. Unification of social policy at the minimum level does not happen, the model of the welfare state retain their differences, which are determined largely dominant political, social and national tradition.

Strategy and policy of the state in the social sector has undergone certain changes associated with the change of priorities. In countries with so-called «coordinated market economies» («continental European model»), the state seeks to boost competitiveness as a major factor for the solution of social and economic problems, and attaches great importance to an active dialogue with the social partners of the state. In the liberal model of the state plays a less significant role in the regulation of social and institutional cooperation. At the same time, the specificity of reforms in the most active welfare state («social-democratic model») is that they remain committed to the principles of equity and universality, social solidarity, to maintain a high level of social welfare payments, despite the development of the commercialization of the social sphere [5].

The process of transformation of the state welfare is aimed at restructuring the system of social benefits on the basis of the transition from a passive to an active social policy. The emphasis is on employment, training, children care, youth and the elderly, the fight against poverty and social exclusion. Particular attention is paid to the problem of pensions based on the «revision of the contract between the generations.»

This policy is based on a new concept of social justice and gives priority to the model, value-oriented post-industrial society, especially the value of skilled labor and knowledge. This takes into account the fact that in modern conditions the desire for regular employment is largely due not only to the need to generate income, but also with the desire for social status, prestige, security, communication and participation in community activities [6].

Government in some industrialized countries have tried to maintain their commitment to welfare policy by creating jobs in the public sector, and in some countries, the state implemented a policy of deregulation and lower wages in order to attract investment in jobs with low wages. In the United States encouraged the use of low-wage labor from developing countries. In Germany, employment protection carried out in less productive sectors and employment growth strategy for high-performance enterprises [4; 11].

Comparative analysis shows that countries with high levels of performance can remain competitive despite the high wages and social spending. The growth of social programs can contribute to motivation and provide greater social consensus, but at the same time — to complicate the situation of the labor force at the global and national levels.

The growth of «flexibility» of labor, a shift towards conservation of the periphery of low wages, unstable employment contracts are a reflection of the changes in social development and transformation of the labor market, its division into privileged (providing high incomes, stable position) and peripheral (low income, unstable position).

In this regard, in the 1990s began to seriously consider alternative strategies of social policy. One of them — civilian income, or «income from participation», which involves the universal right to a guaranteed social minimum, while at the same time the government does not assume other responsibilities in the area  of income support. This approach is designed to encourage people to increase income through work that extends to additional payments, including in times of sickness and old age. Another option would be to provide appropriate social benefits and services, but are set such verification mechanisms and assets that should eliminate the possibility of payments to wealthy groups.

New approaches are required to justify the need for a compromise between competitiveness and social policy. According to this position, certain types of public expenditure are beneficial to capital in the form of investment in education, expanding the multiplier effect of consumption at the expense of social spending, as well as political stability. It should be borne in mind that the costs, according to this approach, should be funded by consumers without affecting the enterprise [4; 20].

Since the mid of 1980s is undergoing profound shift in the development of social welfare in the United States, where the growing emphasis on market mechanisms and targeted policies, receives active development and commercialization of the process of decentralization in the provision of social services. The principle of a balance of rights and responsibilities is declared as a new approach.

In the mid of 1990s with the adoption of a program of temporary assistance to needy families this process has been developed. State administrations may enter into agreements with private companies in respect of training programs. It is believed that the policy promotes the formation of a model of partnership with employers. In some states, they receive subsidies on the payroll and tax incentives for recruitment.

In the US, the ideology of social reform based on «moral grounds» — typical of the liberal model in general (and its American version in particular). They boil down to the fact that it is unacceptable to live at the expense of the state, except for extreme situations — for example, in a sustained and significant disability (disability). Since the 1990s, social policy in this country is considered mainly in the context of active measures — employment of persons receiving social benefits. One of the main provisions of the law of 1996 limits of 60 months (based on the total period of work experience) the duration of social assistance. The majority of its recipients — a single mother.

According to this law, the maximum duration of benefits for social assistance is limited to five years, and the age of the child when the parents are exempt from the obligation to work is reduced from 3 to 1 year. At the same time it strengthens the requirements for participation in active programs, and since 2002 has been increased from 20 to 30 hours of work per week duration for parents of children aged over 6 years. In addition, for those who have no children up to 6 years old, she picked 30 hours, of which at least 20 hours must be given real work and not used for education and training. The new policy states received considerable rights to develop employment programs [7].

These measures are based on the concept of social policy that triggers the obligation to provide assistance recipients to work or actively looking for work. To this end, there are new financial incentives — such as the ability to simultaneously obtain financial aid and wages, introduced the practice of «negative tax.» And the government formally made major progress since the period 1994–2001 years, the number of welfare recipients fell nearly tripled — from 14.4 million to 5.3 million people [8].

However, this does not contribute to a fundamental improvement of the situation, because there was an increase the number of low-paying jobs that do not provide perspective, does not provide sustainable employment, doomed to a low standard of living.

Some elements of this policy have been applied in the countries of Western Europe, which were tightened requirements for the rights to unemployment benefits. According to the adopted program in the UK, the unemployed can not find a job within two months (in some cases — six), he is obliged to participate in public works. At the same time social assistance is limited to a period of five years, and in the case of a person ignores these terms and conditions, payment of benefits ceases. In contrast to the US model, in Western Europe focuses on increasing opportunities for employment and «shared responsibility» of the social partners in relation to social exclusion and measures to be taken in this case [9].

In general, the risk of social policy at the American type in Western Europe is limited, given the social achievements, significant commitment to public values of justice and solidarity. In particular, Western experts believe that the social welfare system in the nordic countries effectively structured and able to confront the new challenges of an aging society and the transformation of the economy. One advantage is the availability of basic income security, which provides protection not only against poverty and social exclusion, but also problems associated with outages. For example, in Finland and Sweden, social assistance provides the highest level of income: an average of 60–70 % of the average wage, while in other countries the figure is about 50 % (less high level typical for the UK) [10]. A wide network of social services to ensure the needs of families in the education of children, and a high level of employment helps to reduce the financial pressure on pension systems.

Revealing the development of social policy in Denmark, where in the 1990s were significantly tightened rules for obtaining unemployment benefits (maximum duration of payment reduced from nine to four years). Active control measures also expressed in the development of information and consulting services, various forms of training, subsidized employment in the public and private sectors. In addition, labor market policy emphasis on decentralization was established 14 regional councils of representatives of the social partners and local authorities. They are designed not only to participate in the development of regional policy in the labor market, but also in establishing close relationships between businesses, educational institutions, social services and employment centers [6; 99].

In the UK, social policy has a high level of coverage, although not fully universal (except health): The system benefits the National Insurance Scheme does not apply to adult inactive population and those receiving income less certain (threshold) level. In the structure of public social expenditure is much more represented benefit the social assistance system based on means-tested. One of the strategic issues — that the country loses in terms of investment in human capital, which is a factor of relatively high levels of poverty and social exclusion.

One of the most important areas of social modernization in the Western countries — the reform of pension systems. Their development should be viewed in the context of changes in the dynamics of aggregate capital structure, as well as conditions of domestic and international competition. In the previous step, pension systems were formed based on the priority of social goals. This is what led to significant advances in the field of pensions. The peculiarity of the present stage — that to the fore once again come economic factors.

Maintaining the level of retirement income to be implemented at the expense of structural and parametric changes in pension systems (see table 2). Practically, this means that for a pension at the same level you must purchase additional pension rights. This strategy involves the promotion of occupational pension schemes and voluntary pension insurance companies, group and individual savings and retirement plans.

Summary disposition, which calls for the transformation of the pension systems, is related to two main factors. Firstly, in terms of shifts in the age structure of the population and the increasing number of people of retirement age traditional pension systems, operating under the aegis of the state, have a limited capacity to save and the more Growth retirement income. Secondly, it is a factor of a new social structure, when a large part of the population (as opposed to the period of formation of a comprehensive distribution system) has a relatively high income, which creates the possibility for the formation of a new social security system commensurate with the Incomes of the population.

T a b l e

Total public pension expenditures in the EU for the period 2004 — 2050 years (including most government payments to replace income persons 55 years of age and over, in% of GDP forecast for 2005)

Total public pension expenditures in the EU for the period 2004 — 2050 years (including most government payments to replace income persons 55 years of age and over, in% of GDP forecast for 2005) Total public pension expenditures in the EU for the period 2004 — 2050 years (including most government payments to replace income persons 55 years of age and over, in% of GDP forecast for 2005) 

Countries with traditionally highly social policy and a large role for the state in income distribution have to revise old standards — at least in the framework of mandatory pension systems. In Germany, the goal — to maintain in 2030 the proportion of 67 — 68 % of the average salary of a worker subject to 45 years of pensionable service within the statutory system (first-tier pension system). In Finland, this object is set to 60 % as part of the statutory system, regardless of income level (subject to the full length of service of 40 years). Such goals in the second and third levels can be seen in the extent to which the premiums are excluded from taxable income. In the Netherlands, this level is limited to necessary to ensure the overall level of substitution of 70 % of income after 40 years of seniority. In Italy, it is assumed that the system of fixed fees, the formation of which was completed in 2035, will lead to a significant reduction in the size of pensions for the same length of employment and retirement age. The level of income replacement worker retiring at 60 years and has 35 years of insurance experience, will decrease from 67.1 % in 2010 to 56 — in 2020 and 48.1 % in 2050 [11].

Meanwhile, the achievement of these levels is problematic because a significant part of the workforce has seniority and salary levels that are insufficient to meet the established indicators.

The question of the level of income replacement is one of the central problems in the reforms of pensions. The social policies of many EU countries actually provides stricter rules of basic pensions. Under the previous system of pensions were calculated on a more favorable basis for considered «reduced» and «Custom» periods, which provides a higher base rate of wages. As a result, the pension is calculated on more favorable terms. However, reforms involve keeping longer periods of work, and even all of the seniority that worsens conditions pensions.

In the last two decades in the Western countries largely unchanged conceptual approach to social policy. This is evidenced by the position became widespread, associated with the formation of a system of targeted social protection. However, these changes are not directly related to the impact of global factors. Reform of the social sphere are due, above all, the transformation of the social structure and economy, and the competitive aspect of the development is paramount. However, it is not opposed to social policy. The principle of equilibrium and motivating the relationship between economic and social factors, despite the changes, is still seen, especially in the EU, as a condition of successful modernization.

Experience the Western countries give a very important reference points for the establishment of appropriate policy in Kazakhstan. Of course, it can not be mechanically transformed on Kazakhstan. But it does not take into account also can not, because it has both national and universal aspects.

One of the main problems is that in Kazakhstan is not formed equilibrium and effective system of income distribution between social groups, between economic sectors, between public and private sectors. The current income distribution is not conducive to solving strategic problems of development of the Kazakh society.

However, the country adopted such regulations as the Law «On social protection of citizens suffered from nuclear tests at the Semipalatinsk nuclear test site», «On social protection of citizens affected by the environmental disaster in the Aral Sea»; created State Social Insurance Fund, the State Fund for employment. Pension Fund. Law «On the state targeted social assistance».

Targeted assistance in a limited manner establishes the range of persons entitled to receive targeted benefits: citizens of Kazakhstan, repatriates, persons with refugee status, foreigners and stateless persons who have residence permits and permanent residence in the Republic of Kazakhstan, with incomes not exceeding features poverty. The person himself/herself, or on behalf of the family applies for the appointment of targeted social assistance to the authorized body on a residence with application form with the number of social individual code. Size of social benefit is calculated on the person authorized body in the form of the difference between per capita income and the poverty line of the region. Average per capita income of the person or each member of the family is calculated by total income (all income other than housing and targeted social assistance actually received in cash or in kind for a specified period of time) obtained in the quarter preceding the quarter for the purpose of treatment of targeted social assistance, number of family members and three months [12].

We agree with the developers of the law is that with very limited financial resources of the state principle of targeted social assistance is the only real way to keep most of the poor. Nevertheless, there are several barriers to its effective implementation.

So, when trying to implement a system of targeted state aid experimentally in the Komi Republic, Volgograd and Voronezh regions of Russia through loans of the World Bank revealed the following picture: many families with both income and poor, become eligible for social security benefits, so applicants for aid were more. In our view, concerns about the emergence of a similar situation in Kazakhstan are not unfounded.

The second problem is that the allowance is paid, equal to the difference between per capita income and human poverty (1956 tenge) — a paltry sum, not even making it possible to meet the minimum needs of people in power (the cost of the minimum consumer basket equal to 4890 tenge). So, a person receiving social aid remains below the poverty line. Nevertheless, despite a number of gaps in the legislation of the Republic of Kazakhstan, the lack of a comprehensive mechanism to solve this problem, is encouraging, the fact that the leaders of many countries and, in particular, and Kazakhstan, have realized the paramount need to solve social problems, not just economic. After all, while for the subjects of the market economy there is a problem worsening crime situation in the society, the growth of infant mortality, incidence of acute infectious diseases and other negative social phenomena resulting from the increasing scale of the army of the poor, there can be no question of building a developed market economy. In this connection I would like to quote the words of Holmes: «The main thing in this world is not where we stand, and then, in what direction we are moving».



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Year: 2015
City: Karaganda
Category: Economy