Lessons from the pandemic for the conservative welfare state

The economic crisis induced by Covid-19 has revealed the breaking points of the conservative welfare state. It is time for a reorientation.

When the economic ramifications of the Covid-19 crisis hit Germany, representatives of the automotive industry pleaded with the chancellor, Angela Merkel, to implement a buyers’ premium on cars. 

The public debate meanwhile focused on those essential workers who maintain our social system and the social groups suffering the most: the medical staff, care workers, cashiers and cleaners on the one hand and on the other the elderly and sick who have had to do without the visits of their loved ones for a long time; the many labour-market participants (above all microenterprises, freelancers and artists) confronted with sudden income loss and existential worries due to the lockdown; and the employees exposed to a triple burden when faced with the home-schooling of their children, housework and their own work at the same time (often within the same limited space). The car industry was not among them.

Without doubt the employers’ worries were comprehensible and justified in light of the economic crises—a crisis which was not predictable and for which nobody can be blamed. We face the most severe downturn since World War II. This creates a situation in which the entire economy, independent of the size and annual turnover of an enterprise, seeks support. 

It is therefore dangerous however to listen to those who make the most noise. Given the fact that almost all sectors have been hit by the crisis and that the suggested buyers’ premium, as with many other state interventions at the moment, would be tax-financed, such an instrument should not be implemented without carefully considering its economic effects together with its socio-political effectiveness.

The economic effects of the 2009 scrappage premium (Abwrackprämie)—not to mention the ecological effects—turned out to be marginal. So why not, to begin with, support the local car-sharing industry or alternative means of transport? What is more, a buyer’s premium for e-cars up to a price of up to €60,000 was already in place from the beginning of 2020 as part of the government’s climate package. When the Klimapaket was adopted in November 2019 this was criticised in that such an incentive only benefited consumers with a middle-class income—an argument which has not lost its validity. 

Social-justice perspective

From the logic of the ‘conservative’ welfare state—as Gøsta Esping-Andersen defined the mainland-European social-insurance model in his classic welfare-regimes typology—this is nothing to worry about. Yet, from a social-justice perspective such lobbying is intolerable. The crisis is revealing who are the real victims of the downturn. The lockdown has struck the entire services sector, which comprises more than three-quarters of western European economies. Within this huge sector freelancers and small entrepreneurs were those affected most directly by the economic losses because they lacked the established safety net that comes into effect for standard employees, as Esping-Andersen already emphasised in 1990. 

For most of those concerned, the funding programmes adopted by governments in France or Germany to date were no help, since they do not cover private expenses or they would entail new debts. That these groups have been among the so-called outsiders of the conservative welfare state is no secret. Nor did the deregulation and labour-market ‘flexibilisation’ of recent decades render them insiders. On the other side of the spectrum, the so-called insiders—public-sector employees and those with standard working contracts, thus enjoying full social security—benefit from a stable income or short-time allowances.

The crisis points to another weak spot of the current order. The coronavirus has generated a vocabulary which cuts across the conservative welfare state’s normative assumptions and legal categories—the notion of systemic importance. Thus, the already fragile concept of standard employment on which the conservative welfare state rests becomes a new faultline. Interestingly, these groups are among those in the labour market who lack a strong collective voice. It is estimated that only around 5 per cent of German caregivers are members of trade unions. What is more, given their below-average income it is unlikely that workers in the critical infrastructure would benefit from a buyers’ premium on cars.

Women marginalised

Last but not least, the politics of crisis (and its mostly male actors) marginalise families, women, children and single parents. For example in Germany, the question as to when the national football league should restart its season received more public attention than the burden of single parents, how to protect children and women from domestic violence, or how social exclusion affected families’ abilities to cope with home schooling. 

This is no coincidence, as shown by the Danish case—one of Esping-Andersen’s ‘social-democratic’ welfare types. In Denmark, younger children and pupils were the first to re-enter the public institutions, while this group has been among the last to benefit from easing the lockdown in such countries as Germany and Belgium.

So, even though Covid-19 does not stop at the rich, as has been suggested by some observers, the crisis has hit the most vulnerable hardest—not only on a global scale but also within the protected space of national welfare states. Viewed through the lens of the conservative welfare state, the powerful foray by the German car industry was no surprise at all—an attempt at self-help by the established insiders. Yet the coronavirus crisis also provides a chance to reconsider the social rights of labour-market outsiders and the social value of (often female) essential workers.