Liberal Social Policy: A Clear and Just Alternative

It is very common to mistake social policy for socialism. Yes, there are a lot of countries in Europe where those two words can be almost synonyms, but there is a clear choice – a better and, surprisingly, more just choice. Of course, I am talking about liberal social policy.

There are a lot of wise authors who describe theoretical aspects of liberal social policy. You have probably read them, so let me just concentrate on a few real-life examples that have worked in Estonia, a country that has had a liberal government for almost 15 years.

Example 1: how to have more children

There are approximately 1,000,000 native Estonians, which means that declining population causes serious worries not only for economic sustainability reasons, but also in terms of surviving as a nation.

In 2002, Estonia had 18,355 deaths and 13,001 births, making the annual birth rate negative by 5,354 people. This might not seem a lot, but keeping in mind the small population, it really is terrifying. Surveys showed a clear reason behind the statistics; the fear of losing the families’ standard of living while one parent is at home was worry No. 1.

In spring 2003, there was election in which both the liberal party and social democrats proposed a different kind of paid parental leave in order to solve the problem. The proposed systems were similar at first glimpse, but – as often – the essence was in the details. When social democrats offered an equal 12-month payment (at the rate of nation’s average salary) for every mother, regardless of her previous income, the liberals studied the issue more thoroughly and proposed a system where the mother (or father!) gets 12 months of her (or his) own salary (with certain minimum and maximum levels).

Luckily, the right-wing coalition won the election, and we got the chance to make our proposal a law. The results were impressive – the birth rate went up by 23% in just 5 years, and the birth rate of women with higher education doubled. The birth rate even reached +35 by 2010, and even with the recent years showing a small decrease in births (probably linked with the overall economic situation and uncertainty), the income-based parental leave is still a clear success-story, which means thousands of more babies every year.

One could argue that this kind of paid leave is not liberal whatsoever. After all, it is the state that is paying parents their previous income. But one has to know that the context was a nation-wide consensus to change the demographic trend and invest in becoming once again a growing nation. And there is a huge difference how the benefit is calculated: the social-democratic lump sum for everyone would have meant that the state is investing the same amount of money as in the liberal choice, and the result is that some get much more than their previous income (with a clear and unwanted moral risk of giving birth as a job), and some get less than their previous salary (meaning that their worry about decreasing their standard of living would still be at least somewhat real).

Other liberal aspects of the system are gender neutrality (it is the family’s choice whether the mother or the father stays at home with the child) and flexibility to work part-time in order to maintain one’s qualifications.

So, in conclusion, the paid parental leave introduced in Estonia is a precisely targeted and effective measure to increase the confidence of young families with babies.

Example 2: universal vs. targeted benefits

The next example could describe almost any social benefit, but let’s continue with children. Since regaining independence, there has been a universal child allowance per every child in Estonia, no matter how the family is doing economically. Naturally, if everybody gets the benefit, the sum per capita cannot be very high (as in most European countries).

In summer 2012, we decided to change the system to target those in need more. Instead of raising the sum for all children by just a few euros, we doubled the sum for those children who are at risk of poverty and (keeping in mind the demographic challenges!) for the families who have 3 or more children. It is not usual to double a social benefit, and it is virtually impossible to double any benefit for everyone. It proved to be possible when targeting those in need.

More precisely, we defined the “in need” criterion as relative poverty (below 60% of median income, the rate is between 17-20% like in most EU countries). It is still too early to say how well this measure works in reducing poverty, but I strongly believe that the number of families and children at risk of poverty will decrease significantly.

Targeting social benefits well is one of the main tasks of any liberal policymaker in charge of social policies. As situations and needs change, the pursuit of effective support is constant.

Example 3: helping people with disability to work

In every society, there are people with disabilities (or limited abilities) for work. One principal way how to help them is the traditional approach that disability pensions – at least to some people – give a signal that one should survive from the monthly pension. The other approach – more modern and certainly more liberal – is to find the abilities in the people, and the means to help them to be active on both labour market and in the society as such.

People with physical disabilities cannot do many kinds of jobs, but – with investments in the working environment, means of transport and appropriate gear – they could often work well doing office jobs. People with hearing disabilities sometimes need special technical equipment in meeting rooms; some people need adjustment of workplace, while others need rehabilitation and some special working conditions. But very often there is at least some ability to work in those previously directed to pensions and inactivity. The ability can be raised considerably by investments in person’s health or working environment.

We are currently preparing the reform in Estonia and planning to invest several hundreds of millions to succeed. Success in this case means helping people to be active in society, and helping them survive on the salary instead of pension. Success means having a more sustainable macro-outlook (more people going from benefit to self-contribution) and – more importantly – higher self-esteem and possibilities for people who have special needs.

There will always be some additional benefits or pensions, and the investments in rehabilitation and workplaces are tremendous. But I am confident that such investments pay off well both emotionally and economically.