A Threat to Social Security? the Impact of Eu Membership on the Finnish Welfare State

Abstract

In the fifth year of membership of the EU, the Finnish welfare state shows no serious signs of erosion. Furthermore, the changes that have taken place in Finnish social policies are largely due to factors separate from EU and EMU membership. As the extent and the effects of EU social policy are very limited and as EU social policy does not for the most part fall within the traditional definition of social policy (a structure of transfers and services aimed at redistribution among the entire population), this article focuses mainly on the indirect effects of EU and EMU membership, on Finnish social policies. This article argues that while social policy restructuring was frequently explained and justified by politicians on the grounds of EU membership, and while central decisionmakers were obviously very determined to meet the convergence criteria, the pressures to fulfil certain macroeconomic criteria, similar to the convergence criteria, would have existed in the absence of any intention to join the EU. The main motives for welfare state restructuring were the recession that eroded the financial basis of the welfare state, and the changed rules of macroeconomic management that rendered a number of economic and social policy responses to economic crises redundant. Furthermore, the logic and details of social policy restructuring can only be understood in the light of domestic social policy structures, institutions, and political legacies.2 The article first describes the changes that have taken place in Finnish social policy in the 1990s; then examines the expected and actual social policy consequences of EU and EMU; and concludes by emphasizing the role of domestic actors as agents of Europeanization. The Finnish welfare state has not undergone systemic change as a result of the restructuring in the 1990s. Finland continues to have a distinctly encompassing model of social provision. The universal character of certain benefits has been eliminated (the national pension and basic sickness benefit) but the impact of this on benefit recipients has not been great.3 Earnings-related benefits continue to provide income replacement at a relatively high level and hence discourage private insurances. Benefits of last resort are now more tightly means-tested, but they still prevent increases in poverty rates effectively. International statistics show that Finland is still one of the world leaders in welfare expenditure (OECD Economic Surveys, Finland, 1998; OECD Economies at a Glance, Structural Indicators, 1996; OECD Historical Statistics, 1997). Relatively equal income distribution, low poverty rates, world-class standards in public services, and many other facts testify to the robust health of the Finnish welfare state (Ministry of Social Affairs and Health, 1996a: 96; Ministry of Social Affairs and Health, 1998a: 5; 1998b: 12). This is particularly impressive in the light of the extremely heavy pressures put on the social EUROPEAN BRIEFING