"In the framework of both the Lisbon Strategy and the Sustainable Development Strategy, European institutions agreed on the necessity to modernise and develop the European social model in the light of slowing growth, persistent structural unemployment, rising inequalities.
In recent years along with the persistence of the main risks of the industrial society (illness, disability, old age) new social risks are brought about by economic and demographic developments; main factors are: a higher probability of job loss for larger parts of society and different age cohorts; changes in size and composition of families with reduction of the capacity to provide “in house” care; limited capacity of welfare systems to deal with these risks due to financial constraints and difficulty in updating welfare arrangements; cultural and education gaps. These transformations pose a serious problem of adequacy of the European welfare states. The present patterns may reveal not as successful as they used to be in protecting all against poverty, in guaranteeing social cohesion and in responding to citizens’ aspirations in modern democracies.
Social challenge is common to all EU Member States, but exposure to old and new social risks largely varies across regions. In this paper, the assessment of regional sensitivity is based on a summary index of social risk which combines several indicators of drivers referring to three relevant dimensions: family, labour market, and welfare. With more detail, the following indicators have been used:
• the share of poor at regional level, as a proxy of the size of the social risk in terms of income;
• the rate of employment calculated on total population, that embodies the social impact of both demographic trends (share of population in working age) and of labour market factors (activity rate on working age population and rate of unemployment);
• the educational attainment of working people, as a proxy of the regional share of low-skilled workers with higher probability of experiencing unemployment or of receiving a low wage;
• an index of efficacy, adequacy and sustainability of the welfare states at national level
According to the level of social risks measured by the summary index, regions have been classified in five typologies which have been displayed in a map. More than one half of European regions show a low or very low sensitivity to social risks. These top class regions are concentrated in Northern (especially low risk regions) and Central Europe along with United Kingdom. On the opposite side, about one quarter of European regions have a high or very high sensitivity confirming the existence of great disparities among countries and regions. Generally speaking, the two most critical areas are individuated in the Mediterranean countries –Portugal, Southern Spain, Greece, Italian Mezzogiorno- and in the Eastern area of new Member States with the exception of Estonia. Comparison with maps of European cohesion policy is interesting. All the regions with high and very high exposure to social risk are regions of Convergence or phasing-out area, with few exceptions. In the other direction, most of the regions of Convergence area show a high and very high social risk exposure. This is especially true for Southern Italy, Spain, Portugal, Greece, Hungary, Poland, Slovakia, Latvia and Lithuania (and would be true also for Bulgaria and Romania not included in summary index). There are however important exceptions regarding some of the new Member States (Czech Republic, Slovenia and Estonia), Eastern Germany and Convergence regions in the United Kingdom showing an intermediate or low social risk sensitivity.
In neighbour countries the picture is more concerning. Fight against poverty and promotion of employment are priorities in each country. Most of them are still faced with a number of challenges such as high unemployment, which particularly affects young people and women, the prevalence of an informal economy, leaving workers without social rights and social protection, as well as the mismatch between education and labour market needs. Most countries lack an integrated approach combining economic, employment and social objectives. They also suffer from poor administrative capacity in this area. Significant efforts are needed to implement effective labour market policies, to promote decent work and guarantee productive employment, rights at work, social protection and equal opportunities for men and women.
As far as challenge intensity is concerned, the European Union is in a favourable condition with regard to social risks in a broader OECD perspective; in fact, all countries with income inequality below OECD average level are European. Nevertheless there are various factors which may increase the intensity of the challenge on Europe.
The number of Europeans living under the poverty line has increased in the last decades. Around 100 million Europeans in 2004 (22.5% of the total population) had less than 60% of the EU median income, but the situation is widely differentiated across countries and within them.
Although social benefits reduce the percentage of people at risk of poverty, serious holes exist in the social protection policies in several countries. In addition there are doubts on the financial sustainability of the present model in the next decades and on its adequacy to deal with new social risks.
The employment and participation rates remain below the targets set within the Lisbon Strategy, especially for women and old workers. Data on educational attainment show that the share of population with secondary and tertiary education is lower than other large OECD countries.
Impacts of social challenge on disparities depend on the relation between regional sensitivity and challenge intensity and they are assessed in a qualitative manner through construction of two scenarios corresponding to the two extremes of the expected range of variation of challenge intensity. A pessimistic scenario is characterised by a decrease in the number of double wage households and an increase in the number of people living in working-poor families or depending on social transfers. In a context of slow growth and of tightening financial constraints, new demand for welfare do not find adequate coverage. The target set by Lisbon Strategy in terms education and of employment rates are only partially achieved. This pessimistic scenario is likely to lead to increasing regional inequalities.
In an optimistic scenario, greater labour demand driven by economic expansion, and more effective policies allow an increase in participation rates and in the number of double wage earner households. In addition investments in education and life long learning increase average skill levels of both local and immigrant workers, reducing the proportion of low skilled low-income workers. Effective reforms of the welfare states, made easier by loosening financial constraints, ensure greater coverage for old and new social risks. This optimistic scenario is likely to be linked to a process of convergence."