The Challenges of the Welfare State

Based on a lecture by Michel Oris

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Economic and social history of globalisation, 16th-21st centuries

Agrarian Structures and Rural Society: Analysis of the Preindustrial European Peasantry ● The demographic regime of the Ancien Régime: homeostasis ● Evolution of Socioeconomic Structures in the Eighteenth Century: From the Ancien Régime to Modernity ● Origins and causes of the English industrial revolution ● Structural mechanisms of the industrial revolution ● The spread of the Industrial Revolution in continental Europe ● The Industrial Revolution beyond Europe: the United States and Japan ● The social costs of the Industrial Revolution ● Historical Analysis of the Cyclical Phases of the First Globalisation ● Dynamics of National Markets and the Globalisation of Product Trade ● The Formation of Global Migration Systems ● Dynamics and Impacts of the Globalisation of Money Markets : The Central Role of Great Britain and France ● The Transformation of Social Structures and Relations during the Industrial Revolution ● The Origins of the Third World and the Impact of Colonisation ● Failures and Obstacles in the Third World ● Changing Methods of Work: Evolving Production Relationships from the End of the Nineteenth to the Middle of the Twentieth Century ● The Golden Age of the Western Economy: The Thirty Glorious Years (1945-1973) ● The Changing World Economy: 1973-2007 ● The Challenges of the Welfare State ● Around colonisation: fears and hopes for development ● Time of Ruptures: Challenges and Opportunities in the International Economy ● Globalisation and modes of development in the "third world"

The twentieth century marked a crucial turning point for the countries of the North, ushering in an era of profound social, economic and political transformation. This period was particularly marked by the rise of industrialisation and changes in the structure of the workforce, leading these nations to gradually adopt the welfare state model. This model promised to expand opportunities and strengthen protections for citizens, offering the prospect of unprecedented prosperity. However, it also brought complex challenges, from financial instability to escalating public debt, and from rising populism to growing income disparities. The twentieth century has thus proved to be an era of progress mixed with contradictions.

Although the welfare state acted as a safety net for many citizens, it also gave rise to a number of problems. These include increasing management costs, the risk of creating systemic dependency and the challenges of providing services to a heterogeneous population. This article examines these issues and discusses the strategies implemented to deal with them over the past century. Today, there is a perceptible weakening of the welfare state, reflecting its declining capacity to protect its citizens in a globalised world. This situation reflects both disillusionment with the welfare state and an increase in xenophobic and nationalist tensions, marking a significant break between different historical periods.

Understanding the welfare state: Foundations and principles

The historical foundations of the welfare state date back to the end of the 19th century and the beginning of the 20th century, a pivotal period marked by major social and economic transformations. At that time, governments began to recognise the need to protect workers against the risks associated with their profession and the hazards of everyday life. This awareness was largely driven by the rise of industrialisation, which had led to difficult working conditions and increased risks of occupational accidents and diseases. In response to these challenges, several countries initiated pioneering social policies aimed at providing protection for workers. These included the introduction of insurance against accidents at work, illness and periods of unemployment. These policies laid the foundations for modern social security systems, which also include benefits such as retirement pensions and health insurance. These social protection systems were financed by social security contributions, generally deducted from workers' wages. This funding model reflects the principle of solidarity, where everyone contributes according to their means to support the most vulnerable members of society. These early initiatives marked a decisive turning point in the way governments approached the issue of social welfare, and laid the foundations for the welfare state as we know it today.

The welfare state is an essential political concept that refers to a system in which the state assumes major responsibility for guaranteeing the social well-being of its citizens. This model involves the provision of vital public services such as health and education, ensuring that these essential services are accessible to all, regardless of income or social status. In addition, the welfare state provides a range of social benefits, including unemployment benefits, family support and pensions, to support individuals and families during periods of vulnerability or change in life circumstances. One of the fundamental aims of the welfare state is to reduce social inequalities. This is often achieved through income redistribution policies, whereby the better-off contribute more to the funding of social services and benefits. At the same time, the welfare state plays a crucial role in preventing poverty, by guaranteeing a minimum standard of living for all citizens, which may include housing support measures or allowances for the most disadvantaged. The concept of the welfare state took root in Europe in the 1930s and 1940s, in response to the economic crises and social unrest of the time. After the Second World War, many countries developed more developed welfare state models, recognising the need for a more active role for the state in supporting social welfare. Since then, this model has become standard in many developed countries, although its extent and modalities vary considerably from country to country. Today, the welfare state continues to evolve in response to current demographic, economic and social challenges. It remains a central topic in contemporary political and economic debates, underlining its continuing importance in structuring modern societies.

The Jobs Crisis and its Impact on the Welfare State

The crisis of the welfare state is indeed a subject of intense and prolonged debate, reflecting the challenges facing many social systems around the world. One of the crucial aspects of this crisis is its close relationship with the jobs crisis, which is putting considerable pressure on the mechanisms and resources of the welfare state. The jobs crisis, characterised by high levels of unemployment and increasing job insecurity, has led to an increase in the number of people relying on the services and benefits of the welfare state. This situation has highlighted some of the limitations and inadequacies of existing systems, particularly in terms of their ability to meet growing demand. Rising unemployment and job insecurity have not only increased the number of potential beneficiaries of social programmes, but have also reduced the contribution base, as fewer people are working and contributing to the financing of social benefits. Against this backdrop, governments and policymakers are faced with complex dilemmas. On the one hand, there is a compelling need to provide sufficient support to those affected by the jobs crisis. On the other hand, they must manage budgetary and economic constraints, while seeking sustainable solutions to reform and strengthen welfare state systems. This requires careful consideration of how social and economic policies can be better integrated to respond effectively to the changing needs of the population. Possible solutions could include reforms to improve the efficiency and sustainability of social protection systems, initiatives to stimulate job creation and worker training, as well as measures to reduce inequalities and support career transitions. The crisis of the welfare state, which is intrinsically linked to the jobs crisis, poses major challenges that require innovative responses adapted to the changing global socio-economic landscape.

Historically, innovation has often been a driver of job creation, paving the way for new industries and economic activities. This dynamic has made it possible to compensate for, or even surpass, the jobs lost as a result of automation or the obsolescence of certain practices. However, in the current context, it seems that the impact of innovation on employment has become more complex. One of the major concerns is that recent innovations, particularly in technology and automation, could lead to a net destruction of jobs. These advanced technologies can replace not only manual and repetitive tasks, but also certain functions that require a higher level of skill. This trend is particularly visible in low-level jobs, where automation can replace simple tasks at a lower cost and with greater efficiency. This raises questions about the function of the individual in the economic process and how society can adapt to these changes. Workers whose jobs are threatened by automation may find themselves without immediate alternatives, exacerbating social and economic problems such as unemployment and inequality.

The welfare state plays a crucial role in modern life, providing an essential safety net for those unable to support themselves. This function is all the more important in a context where levels of poverty and unemployment are tending to rise, putting the system under considerable pressure. The crisis of the welfare state in many countries is exacerbated by a growing demand for social services, which often exceeds available resources. This situation is partly fuelled by socio-economic challenges such as the rising cost of living, stagnant wages, and demographic changes such as an ageing population. In addition, recent technological advances and globalisation have led to a rapid transformation of the labour market, creating new forms of job insecurity. Faced with these challenges, governments need to rethink and reform their welfare state systems to make them more sustainable, efficient and adapted to today's needs. This could involve adjustments in the way services are financed and administered, better integration of economic and social policies to stimulate job creation, and investment in education and training to meet the demands of a changing labour market. In addition, it is also crucial to take account of the equity and social justice dimension in the reform of the welfare state. This means ensuring that services and benefits are distributed fairly and are accessible to all, particularly the most vulnerable groups in society. The crisis of the welfare state is therefore a complex issue that requires multi-dimensional solutions, taking into account current economic, social and demographic realities. The ability of governments to innovate and adapt in this area will be essential to guarantee the well-being and security of their citizens in the future.

An analysis of the impact of the 1973 crisis on the welfare state reveals a twofold challenge faced by this system. This period marked a crucial turning point in the management and perception of the welfare state. Historically, the welfare state was conceived and developed in response to urgent social needs, particularly in the context of economic crises and wars. However, the economic crisis of 1973 introduced unprecedented challenges, testing the robustness and sustainability of these systems. The first major impact of the crisis on the welfare state was on incomes. The employment crisis, characterised by a significant rise in unemployment, directly affected social security receipts. Given that the financing of the welfare state is largely based on contributions from workers and employers, an increase in unemployment means a reduction in the financial resources available. This situation has created a funding problem for social programmes, making them increasingly dependent on state subsidies and public debt. The second challenge concerns the costs of the welfare state. With rising unemployment, there has been an increase in the number of people dependent on social benefits, particularly unemployment benefits and income support. This increase in demand for social benefits put additional pressure on already limited resources, exacerbating the imbalance between the revenue and expenditure of the welfare state. As a result, the crisis of 1973 not only reduced the revenues of the welfare state, but also increased its expenditure, leading to a deficit in the management of these systems. This period underlined the vulnerability of the welfare state to economic fluctuations and highlighted the need for more flexible and resilient management of social policies. It also stimulated debates on reforming the welfare state, looking for ways to make it more sustainable in the face of economic and demographic challenges.

The Apogee and Achievements of the Welfare State

In the years following the Second World War, the welfare state developed and flourished under the influence of Keynesian policy. This approach, based on the theories of economist John Maynard Keynes, argued that state intervention in the economy was necessary to regulate business cycles, stimulate demand in times of recession and reduce unemployment. Under this policy, the welfare state was seen as an essential means of promoting social welfare and equity. However, from the 1970s and especially after the economic crisis of 1973, a challenge to this model began to emerge. The political right, and later some factions of the left, gradually adopted a new orthodoxy in economic policy. This new approach emphasised fiscal discipline, deficit reduction, and the gradual withdrawal of the state from many areas of the economy. The shift to this fiscal orthodoxy marked a turning point for the welfare state. Austerity policies and budget cuts in social services became commonplace, motivated by the desire to reduce public spending and control inflation. These changes have led to a reduction in the benefits and services offered by the welfare state, as well as an increase in inequality and social tensions in many countries. Thus, the heyday of the welfare state coincided with the beginning of a period of questioning and restructuring, in which Keynesian principles gave way to a more conservative, balanced-budget approach. This transition profoundly influenced the way in which welfare systems were perceived and managed in the decades that followed.

A significant ideological shift in European economic policy took place, marked by a shift from Keynesian policy to German ordo-liberalism. Ordo-liberalism, with its emphasis on strict regulation and fiscal discipline, became a dominant force, profoundly influencing economic policy in Europe. According to the principles of ordo-liberalism, economic stability is achieved through the implementation of clear rules and strong regulation, particularly in the monetary sphere. The idea of budgetary orthodoxy, coupled with monetary orthodoxy, is at the heart of this approach. The aim is to maintain sound public finances, with particular emphasis on avoiding excessive budget deficits. Fiscal discipline is seen as essential to currency stability, with the underlying idea that an absence of government deficits contributes to a strong currency. The influence of ordo-liberalism is particularly evident in the economic management of the European Union. The Maastricht criteria, for example, which impose strict limits on Member States' budget deficits and public debt, reflect this economic philosophy. This contrasts with Keynesian policy, which advocated more active state intervention in the economy, particularly through public spending to stimulate demand in times of recession. Ordo-liberalism has therefore had a major influence on the way economic policies are formulated and implemented in Europe, playing a key role in shaping the continent's current economic policy, and to a large extent conditioning responses to economic crises and approaches to financial regulation. This predominance of ordo-liberalism has also had repercussions on the design and management of the welfare state, favouring fiscal prudence and monetary stabilisation to the detriment, at times, of social spending.

The period following the heyday of the welfare state has indeed seen a series of reforms, often driven by growing concerns about public debt. This marks a significant change in the way public debt is perceived and managed politically. In the 1980s, several European countries adopted Keynesian-inspired policies characterised by increased state intervention in the economy. These policies were generally aimed at stimulating economic growth and reducing unemployment through targeted public spending and economic regulation. However, this approach often led to an increase in public debt, partly due to larger budget deficits. As debt accumulated, governments began to question the long-term viability of this strategy. Public debt thus became a major political issue, leading to a gradual shift towards policies more focused on deficit reduction and debt control. This transition was partly influenced by the emergence of ordo-liberalism and neo-liberalism, which advocated greater fiscal discipline and a reduced role for the state in the economy. The reforms undertaken as part of this debt policy often involved cuts in public spending, including in welfare state programmes. These austerity measures have been justified by the need to reduce public debt and ensure long-term economic stability. However, they have also raised concerns about their impact on social welfare and the distribution of resources within society. As a result, public debt management has become a central aspect of economic policy, profoundly influencing the design and implementation of social and economic policies in Europe. This period has seen a significant shift in policy priorities, with increasing emphasis on financial stability and fiscal sustainability.

Contemporary Challenges and Critiques of the Welfare State

The evolution of France's budgetary situation after the 1973 crisis is a good illustration of how the budget deficit and public debt have become central issues, both in economic and political terms. Initially, the budget deficit and the accumulation of public debt were seen mainly as inevitable consequences of the economic policies put in place in response to crises. In France, after the 1973 oil crisis, the government pursued a counter-cyclical economic policy in line with Keynesian principles. The idea was to stimulate demand and employment through increased public spending, despite the fact that this would lead to a budget deficit. However, despite these efforts, the expected economic growth did not materialise as expected. Instead, France, like many other countries, has been faced with economic stagnation, high unemployment and weak growth. This has led to a steady increase in public debt, as government revenues have not been sufficient to cover increased spending. Over time, public debt has become a major political issue and subject of debate. Critics have pointed out that the continued accumulation of debt limits the government's ability to pursue effective policies and threatens long-term economic stability. On the other hand, defenders of public spending argued that such investment was necessary to support the economy and social welfare. This led to a questioning of Keynesian economic policies and to the adoption of stricter measures of fiscal discipline. The debt spiral in France, as in other countries, was a key factor in the shift towards economic policies focused on reducing deficits, stabilising debt and, in some cases, adopting austerity measures. France's post-1973 experience reflects a paradigm shift in economic management, where deficit reduction and debt control became central priorities, strongly influencing the economic and social policies of the following decades.

The 1980s marked a significant turning point in the perception and management of the welfare state, with the emergence of powerful criticisms that led to major reforms. These criticisms, often rooted in a neo-liberal perspective, called into question the founding principles and effectiveness of the welfare state. The first major criticism, voiced mainly by neoliberals, was that the welfare state consumed an excessive proportion of public funds without generating any corresponding wealth. This criticism argued that high social spending was not only economically inefficient, but could also have perverse effects, such as discouraging private investment and slowing economic growth. According to this view, governments should reduce their involvement in the economy and minimise public spending in order to foster an environment more conducive to private initiative and economic efficiency. The second criticism concerned the social effectiveness of the welfare state. Neo-liberals and other critics argued that welfare systems were inefficient and discouraged work and self-sufficiency. They argued that generous welfare state benefits could create dependency and reduce the incentive to work, leading to a "poverty trap" where individuals were locked into a cycle of welfare dependency. These criticisms led to substantial reforms in several countries, notably the United Kingdom and the United States. In the UK, Margaret Thatcher, elected in 1979, initiated a series of reforms aimed at reducing the role of the state in the economy, privatising many public companies and cutting social spending. Similarly, in the United States, President Ronald Reagan, elected in 1981, also implemented neo-liberal policies, reducing welfare state spending and promoting greater liberalisation of the economy. These changes symbolised the apogee of economic liberalism and marked a significant retreat from the welfare state model as it had been conceived and developed in the post-war period. These reforms had a profound and lasting impact on the structure and operation of social protection systems in the Western world.

Despite the adoption of economic policies geared towards liberalism in countries such as the United States and the United Kingdom, social spending in these countries has not necessarily fallen as might have been expected. In contrast, the Scandinavian countries, often cited as examples of robust welfare state models, have seen a reduction in social spending. In the United States and the United Kingdom, despite efforts to reduce the role of the state and public spending, growing social needs and structural challenges, such as an ageing population and persistent poverty, have continued to require high levels of social spending. This spending has been driven by the need to respond to persistent social problems, as well as by political and public pressure to maintain a certain level of social protection. In Scandinavia, the reduction in social spending can be explained by a combination of factors, including effective management of public finances, structural reforms to improve the efficiency of social services, and a commitment to the principles of an open market economy, while maintaining a strong social safety net. However, the dismantling or downsizing of welfare state systems in some countries has had significant social consequences. One of the most notable effects has been an increase in the poverty rate and a worsening of income inequalities. Cuts in social benefits and reduced investment in areas such as health and education have often increased economic and social disparities. These developments have highlighted the challenges inherent in striking a balance between economic efficiency, fiscal discipline and social responsibility. Thus, the history of the welfare state in this period reflects the complexity of social and economic policies and the tensions between the objectives of reducing expenditure and preserving social welfare.

Multidimensional analysis of poverty

Poverty is a multidimensional social condition that goes beyond a simple lack of financial resources. It also encompasses the lack of access to essential social and cultural resources, which limits the ability of individuals or groups to participate fully in society. The relative aspect of poverty is crucial. The definition and perception of what constitutes a 'normal' life varies considerably from one country to another and from one era to another. What is considered an acceptable standard of living in one society may be perceived as inadequate or precarious in another. As a result, poverty is often measured in relative terms, taking into account the specific socio-economic context of a given region or period.

In the social sciences, poverty analysis is used not only to assess the level of well-being of populations, but also to understand economic and social disparities within societies. This understanding is crucial to the design and implementation of effective public policies to combat poverty. Measures taken can include income redistribution policies, education and training programmes, public health initiatives, and economic development strategies aimed at creating employment opportunities and improving living conditions. In addition, the way in which poverty is measured and conceptualised has a direct impact on public perception of the problem and the priority given to solving it on political agendas. This underlines the importance of accurate data and relevant analytical approaches to understanding the nature of poverty and developing effective strategies to alleviate it.

The concept of the poverty line is a fundamental but complex element in socio-economic analysis. It refers to the level of income required to meet basic needs in a given society. However, determining this level is a difficult task, given that the definition of basic needs and their cost vary considerably from one context to another. The relative nature of poverty is a crucial aspect of this concept. The poverty line in a developed country differs greatly from that in a developing country, reflecting variations in living costs and societal norms. What is considered a decent standard of living in one region may be deemed insufficient elsewhere, making poverty a highly contextual condition. In addition, the methodology used to calculate the poverty line greatly influences the results. Different approaches exist, ranging from the use of a fixed percentage of national median income to assessments based on the cost of basic needs. This methodological diversity leads to differences in the measurement and perception of poverty. The challenge of measuring poverty is not limited to income, but also encompasses other aspects such as living costs, access to public services and overall quality of life. Poverty is not just a lack of monetary income; it also includes access to non-monetary resources, such as education and health, which are essential for a quality life. The concept of the poverty line is also the subject of intense debate and criticism. Some believe that current measures are too simplistic or do not take sufficient account of regional disparities and individual variations. Others call for a broader vision of poverty, encompassing wider dimensions of well-being and social exclusion, beyond simple income measures. Although the poverty line is a useful tool for assessing and comparing the economic well-being of populations, it must be seen as a contextual estimate, subject to variation and interpretation. To effectively combat poverty, it is crucial to recognise and embrace this complexity and relativity when formulating public policy.

In the United States, the poverty rate has fluctuated significantly since the late 1950s. In those years, around 22% of the population lived below the poverty line. This high proportion reflected the socio-economic challenges of the time, including income inequalities and limited access to quality health and social services for a large proportion of the population. However, in the years that followed, particularly up to the mid-1970s, there was a significant reduction in poverty, with the rate falling to 11%. This improvement can be attributed to a number of factors, including economic growth, the expansion of welfare state programmes, and health and education reforms. These efforts have helped to improve the standard of living of many Americans and reduce economic inequality. However, in the 1990s there was a deterioration, with the poverty rate rising to around 15%. This increase can be linked to a number of factors, including changes in the economic structure, the rising cost of living, and the limits of existing social and economic policies. When the poverty line is adjusted for inflation, the poverty rate of 22% in the 1950s was halved by the mid-1970s. However, recent trends suggest a return to the poverty levels of the 1950s, a worrying development that underlines the need for more effective policies to combat poverty. At the same time, in the European Union, an upward trend in poverty has been observed over the last 25 years. This may be due to a series of economic crises, austerity policies implemented in several countries, and the impact of globalisation and technological change on the labour market. This increase in poverty in Europe also highlights the importance of robust economic and social policies to guarantee the security and well-being of citizens. These trends indicate that, although significant progress has been made in the fight against poverty, many challenges remain. They underline the importance of a comprehensive and sustained approach to tackling the root causes of poverty and ensuring a decent standard of living for all.

Dynamics and Trends in Socio-Economic Inequality

The rise in poverty observed in many societies is intrinsically linked to the increase in inequality. This relationship highlights the complexity of today's socio-economic challenges and the importance of an integrated approach to solving them.

One of the major causes of growing inequality is globalisation and technological change. These phenomena have reshaped economies, creating new opportunities for wealth but also contributing to the disappearance of certain jobs. These developments have often favoured highly skilled workers, exacerbating the income gap between different sections of the population. At the same time, those who do not have access to adequate training or the necessary economic opportunities find themselves lagging behind, reinforcing inequalities.

Tax and social policies also play a crucial role in managing inequality. Progressive tax systems and targeted social spending can help to reduce inequalities, while policies that favour the better-off and cut back on social programmes can exacerbate them. In this sense, the way in which governments choose to allocate resources and tax citizens has a direct impact on the distribution of wealth and, by extension, on poverty rates.

Furthermore, wage stagnation for low-income workers, combined with substantial increases for top managers and specialised professionals, contributes to an unequal distribution of wealth. This wage disparity reinforces economic segregation and limits the opportunities for low-income individuals to rise above the poverty line.

Access to education and opportunities is also a key factor in the fight against inequality and poverty. Quality education and equal opportunities for all are essential to breaking the cycle of poverty and ensuring a fairer distribution of wealth. Lack of access to these resources can perpetuate poverty and inequality across generations.

Inequalities Since the Industrial Revolution: A Historical Context

Between the 1850s and the 1930s, many societies experienced significant improvements in living conditions. This period, marked by rapid industrialisation and technological progress, brought about profound changes in the way people lived and worked. Although this era was characterised by considerable social and economic disparities, it also saw the emergence of new jobs, improved infrastructure and greater access to goods and services previously inaccessible to large sections of the population.

The period from 1930 to 1970 was particularly crucial in reducing poverty. The rise of the consumer society, combined with the application of the Fordist model of mass production, led to a substantial improvement in living standards. Fordism, characterised by standardised production and high wages, gave the middle class access to a wider range of goods. At the same time, the development of the welfare state, with transfer incomes such as pensions, unemployment benefits and social assistance, played a key role in reducing poverty and stabilising the economy. However, since the 1970s, the situation has changed significantly. Inequalities have tended to increase, a phenomenon often attributed to factors such as globalisation, technological change, and economic and fiscal policies. This period has also been marked by more uncertain economic growth and increased challenges for the funding of the welfare state. The rising cost of social services, combined with sometimes limited tax resources, has posed considerable challenges to maintaining the level of social benefits.

The financing of the welfare state has become a central issue of political economy, involving debates on resource allocation, taxation, and the balance between market policies and state intervention. This situation underlines the need for prudent and innovative economic and social management to meet the changing needs of societies and to ensure a fair distribution of wealth. This historical evolution reflects the fluctuations and ongoing challenges in the fight against poverty and inequality, underlining the importance of adapted and responsive policies to meet these challenges.

Recent trends in inequality: a contemporary analysis

The wealthiest 5% of US households saw a spectacular rise in their incomes, with an increase of 81% after adjusting for inflation. This income growth for the richest contrasts sharply with that for lower income groups. For example, the poorest 20% of households saw their incomes rise by just 3% over this period. This disparity indicates not only a growing concentration of wealth, but also a widening economic gap between rich and poor.

At the bottom end of the economic scale, the situation is even more worrying. One in ten Americans has a lower income than in 1977, suggesting a deterioration in economic conditions for a significant proportion of the population. This stagnation or decline in income for the poorest can be attributed to a variety of factors, such as changes in the structure of the labour market, the decline in the value of minimum wages, and economic and tax policies. For the middle classes, which make up around 60% of the US population, the increase in income has been relatively modest, with an increase of just 8% compared with 1977. Although this represents growth, it is small compared to that of the upper strata of society. At the top end of the scale, the scenario is very different. The richest 20% of Americans have seen their income rise by 43% compared with 1977, and for the top 10% the increase is even more marked, with a 115% explosion in income over the same period. These figures illustrate a considerable accumulation of wealth among the most affluent. These trends show that economic inequality has increased in the US over this period, with substantially higher economic gains for the richest compared to the middle classes and the poorest. This dynamic highlights important questions about economic equity, social mobility, and the policies needed to address these growing inequalities.

Key Factors in the Rise of Inequality: Understanding the Deep Causes

The reality of rising inequality is widely acknowledged, although there are some exceptions. One of the major factors behind this rise in inequality is the retreat of the welfare state. In many countries, cuts in social spending, the privatisation of public services and reductions in social security benefits have contributed to a more unequal distribution of wealth. These policies have often been justified by the need to reduce budget deficits and promote economic efficiency. However, they have also had the effect of reducing safety nets for the most vulnerable populations and reducing income redistribution, thereby exacerbating inequality and poverty.

The globalisation of the labour market is another important factor. It has led to an intensification of competition on a global scale, putting workers from different countries in competition with each other. This competition has often favoured countries with lower labour costs, leading to company relocations and de-industrialisation in certain regions, particularly in developed countries. These changes have had a significant impact on jobs and wages, particularly in the manufacturing sectors, contributing to an increase in income inequality. In addition, advances in transport and logistics have made it easier and cheaper to move production around the world. This has enabled companies to maximise their profitability by taking advantage of differences in production costs between countries, but it has also contributed to the loss of jobs in certain sectors and regions, exacerbating deindustrialisation.

These combined factors - the decline of the welfare state, the globalisation of the labour market, and changes in production and transport - have contributed to an increase in economic inequality and a deepening of social divisions. They pose considerable challenges for policymakers, who must find ways to balance the benefits of globalisation and economic innovation with the need to protect workers and reduce inequalities.

There is a major transformation in the structure of the modern labour market, marked by a shift to a society dominated by service sector jobs. This change has profound implications for the nature of jobs and the dynamics of the labour market. Indeed, the transition to a service-based economy brings with it a major challenge in terms of matching skills. The skills and expertise required in the industrial sector often differ from those required in the service sector. This divergence creates a gap where many workers, particularly those from industry, find themselves without the necessary qualifications to adapt easily to the new jobs being created in the service sector. This skills mismatch can lead to structural unemployment and limit the opportunities for these workers to re-enter the labour market. In addition, the current dynamics of the labour market are tending towards dualisation, with jobs increasingly concentrated at the extremes of the spectrum in terms of skills and pay. On the one hand, we are seeing the creation of highly-skilled, well-paid jobs, and on the other, an increase in low-skilled, poorly-paid jobs. This dualisation contributes to economic and social polarisation, with fewer job opportunities for the middle class.

Migrants, in particular, can find themselves at either end of this spectrum. Some work in high-skilled, well-paid jobs, while others find themselves in low-paid, insecure employment. This situation reflects both the varying levels of skills and education of migrants and the types of opportunities available to them in host economies. The transition to a post-industrial society is therefore one of the main causes of these upheavals. This evolution has not only transformed the nature of work and the skills required, but has also reorganised the socio-economic structure of societies. To meet these challenges, it is crucial to develop appropriate education and training strategies, as well as policies to support the creation of quality jobs and facilitate the transition of workers to new sectors of activity.