University of Antwerp Lecture 9: Working in the Welfare State

Conceptual Foundations of Work and the Labour Market

• Definition of Work: Work is defined as a job or task that individuals perform in exchange for money or other forms of compensation.

• Labour Market Exchanges: These exchanges of work for compensation occur within the labour market.

• Wage: The price of work, typically calculated per hour, is referred to as the wage ($\text{wage}$).

• Three Basic Social Institutions on the Labour Market:

  • Families: Act as the suppliers of work.

  • Firms: Act as the entities that demand work.

  • Government: Functions in two capacities:

    • Demanding work as an employer.

    • Regulating exchanges on the labour market through labour market policy.

• Multifaceted Functions of Work: Beyond providing a wage, work serves several critical social and psychological functions:

  • It structures time for the individual.

  • It provides a collective purpose.

  • It facilitates social contacts.

  • It provides social status.

  • It keeps workers active.

• Formal vs. Informal Work:

  • Formal Work: Characterized by a formal working agreement between the employer and worker that explicitly specifies a wage, work hours, and workdays.

  • Informal Work: Occurs when there is no formal working agreement in place.

• Work as a Component of the Social Contract: Work is a central pillar of the social contract because workers contribute to society by:

  • Generating added value.

  • Paying taxes.

  • Paying social insurance contributions (applicable only to formal work).

• Societal Response to Disruptions: How a society manages economic disruptions (e.g., financial crises, the $COVID-19$ pandemic) and the resulting loss of work is a definitive element of the social contract.

Breadwinner Models and Family Policy

• Male Breadwinner Model:

  • One partner (typically the wife) stays at home.

  • Characterized by non-generous parental leave policies.

  • Examples include Southern conservative welfare states, such as Italy.

• One-and-a-Half Breadwinner Model:

  • One partner (typically the wife) works part-time.

  • Features less generous parental leave policies and subsidized childcare.

  • Examples include conservative welfare states like Belgium.

• Dual-Earner Household Model:

  • Both partners work full-time.

  • Supported by generous parental leave policies and subsidized childcare.

  • Typical of Social-democratic welfare states, such as Sweden.

• Belgium (Anno 2022) Statistics:

  • Women: $42.5\%$ work part-time, while $57.5\%$ work full-time.

  • Men: $11.8\%$ work part-time, while $88.2\%$ work full-time.

Labour Market Metrics and Definitions

• Population at Working Age (A): Encompasses everyone between the ages of $15$ and $64$.

• Inactive Population (B): Individuals who are not working and are not available for or looking for work (e.g., students, housemen/housewives, pensioners).

• Active Population (C): Comprised of people who are either employed ($D$) or unemployed ($E$).

  • $C = D + E$

• Employment/Unemployment States:

  • Employed (D): People currently holding a job.

  • Unemployed (E): People without a job but searching for and available for work.

• Full Employment: A state where everyone in the active population works ($C \approx D$) and unemployment is near zero ($E \approx 0$), often allowing for a small degree of "frictional unemployment."

  • The founding fathers of the welfare state (e.g., Beveridge) considered full formal employment a central objective and a necessary condition for the welfare state's sustainability.

• Key Formulas:

  • Employment Rate: The ratio of employed people ($D$) to the population at working age ($A$).

    • $\text{Employment rate} = \frac{D}{A}$

  • Unemployment Rate: The ratio of unemployed people ($E$) to the active population ($C$).

    • $\text{Unemployment rate} = \frac{E}{C}$

European and Belgian Employment Statistics

• European Pillar of Social Rights (EPSR) 2030 Targets:

  • Employment: At least $78\%$ of the population aged $20$ to $64$ should be in employment by $2030$.

  • Training: At least $60\%$ of all adults should participate in training every year by $2030$.

  • Poverty Reduction: A reduction of at least $15$ million in the number of people at risk of poverty or social exclusion.

• Detailed Breakdown for Belgium (20-64 Age Range):

  • Active Population: $76$ out of $100$

    • Employed: $72$

    • Unemployed: $4$

  • Inactive Population: $24$ out of $100$

    • Searching/Available: $3$

    • Unable to work: $7$

    • Housewife/man: $4$

    • Student: $5$

    • Early retirement: $5$

• Comparison: Belgium vs. Flanders (per 100 people aged 20-64):

  • Active: Belgium ($76$) vs. Flanders ($79$)

  • Employed: Belgium ($72$) vs. Flanders ($77$)

  • Unemployed: Belgium ($4$) vs. Flanders ($2$)

  • Inactive: Belgium ($24$) vs. Flanders ($21$)

• Longitudinal Trends:

  • Gender: Female labour force participation has risen significantly since $1986$, closing the gap with men.

  • Education: Employment rates are highest for high-education levels and lowest for low-education levels.

  • Sectoral Shifts: Since the mid-$19^{th}$ century, employment in agriculture has declined to nearly zero, manufacturing peaked and then declined, while the services sector has grown to dominate the economy ($1840-2015$ trends in US, Sweden, Belgium).

Flexibility and Modern Work Arrangements

• Routine Jobs: Many disappearing jobs are routine-based (factories, bank branches) due to technological displacement.

• Evolution of the Labour Force: It has become more diverse (more women), older (later entry due to education, later exit), and features more flexible arrangements.

• Types of Flexible Work:

  • Temporary Contracts: Fixed-period agreements.

  • Part-time Work: Fewer hours than full-time.

  • Self-employment: Working for oneself rather than an employer.

  • Gig (Platform) Work: Wage based on one-time projects ("gigs"), often via online platforms like Uber or Deliveroo.

  • Zero-hour Contract: Employer is not obliged to provide minimum hours, and worker is not obliged to accept work. (Common in UK and Netherlands; absent in Belgium).

  • Temporary Agency Employment: Worker is employed by an agency and hired out to a user company; there is no contract between the worker and the user company.

• Risks of Flexibility: Trend toward informal work (gig work) shifts many risks to the workers and poses a challenge for the organization of traditional social security (social insurance).

• Economic Impact: A report from May $2025$ notes that the increase in student labor and flexi-jobs could lead to a gap of $€1.5$ billion in social security revenue by $2029$ due to lower contributions.

Trade Unions and Social Dialogue

• Trade Union: An organization of employees aimed at improving or maintaining working conditions. They represent employees in social dialogue with employers.

• Challenges: Face "free rider" problems and internal tensions between "insiders" (unionized/employed) vs. "outsiders."

• Belgian Trade Union Context:

  • Origins in the second half of the $19^{th}$ century (legalized in $1898$).

  • Divided by ideological pillars: Socialist, Catholic, and Liberal.

  • Rerum Novarum ($1891$): An encyclical by Pope Leo XIII addressing the misery of the working class and the need for protective organizations after the abolition of ancient guilds.

• Union Density: Refers to net union membership as a proportion of wage and salary earners. High in Sweden and Belgium; low in France.

• The Ghent System:

  • Responsibility for unemployment benefits is held by trade unions rather than a government agency, though funded by the government.

  • Promotes higher union membership.

  • Traditional Ghent: Denmark, Finland, Iceland, Sweden (non-compulsory, tax-funded).

  • Quasi-Ghent (Belgium): Compulsory unemployment insurance where trade unions are involved in the provision of benefits.

Wage Determination and Income Protection

• Benchmark Wage Theory: Wages are determined by labour demand and supply. Increased demand (e.g., for programmers) raises wages; increased supply (e.g., through education) can lower them.

• Social Dialogue in Belgium:

  • Negotiations take place between social partners (Employers' organizations and Trade Unions).

  • The "Group of 10" (social partners) negotiates a central wage norm every two years.

  • A wage norm ceiling is defined by wage increases in France, Germany, and the Netherlands.

• Automatic Wage Indexation:

  • Automatic adjustment of wages to realized inflation.

  • Measured by the Health Index: Consumer prices excluding tobacco, alcohol, and fuel.

  • Exists in Belgium, Luxembourg, Cyprus, and Spain.

  • Popular in the $1970s$ but abolished in the $1980s$ in nations like the Netherlands, Denmark, France, and Italy to avoid inflation spirals.

• Minimum Wage:

  • Ensures fair compensation for work. No full-time worker in Belgium (older than $18$) can be paid less than $€2,189.81$ per month (as of April $1$, $2026$).

  • In theoretical benchmark cases, a minimum wage can lead to unemployment where supply exceeds demand.

• Incentive Programs:

  • Earned Income Tax Credit (EITC): Used in the US/UK to increase wages for low-skilled workers through the tax system to reduce poverty and increase work incentives.

  • Flanders Jobbonus: People earning less than $€2,500$ per month can receive a cash transfer of up to $€600$ to increase the incentive to work.

• Incentives and Ceilings: Mention of the CEO-to-worker compensation ratio, which saw US CEOs make $312$ times more than typical workers in $2017$, compared to $20$ times in $1965$.

Unemployment Benefits and Active Policies

• Unemployment Benefit in Belgium:

  • Part of social insurance; compulsory contributions.

  • Benefit is $65\% - 60\%$ of the last wage, reducing over time.

  • Unlimited duration in principle, but subject to activation policies.

  • New Rules (2026 onwards): Maximum $2$ years of benefit (unless older than $55$); benefits will reduce faster.

• Temporary Unemployment: Used during economic downturns, bad weather, or accidents. Generosity was increased to $70\%$ during the $COVID-19$ crisis.

• Active Labour Market Policies (ALMP): Aim to give people access to the labour force through motivation, job readiness, and expanding opportunities.

• Job Guarantee Policy: The government acts as the employer of last resort.

  • Historical examples: USSR ($1928-1991$), USA ($1935-1943$), India (Guaranteed Employment Scheme for $100$ days at minimum wage), and South Africa.

  • Modern Trials: Marienthal Pilot (Austria, $2020$-present), France and Wallonia's "Territories without long-term unemployment."

• Specific Work Policies:

  • Collective Tailored Work: Subsidized jobs in social enterprises for those with disabilities.

  • Article 60: Fully subsidized one-year jobs for social assistance recipients.

Psychological Well-being and Occupational Health

• Unemployment and Life Satisfaction: Empirical data rigorously shows that unemployment reduces life satisfaction. Life satisfaction is often measured using the "Cantril Ladder" ($0$ to $10$ scale).

• Burn-out and Depression: In Belgium, over $112,000$ workers are absent for more than one year due to burn-out or depression.

  • Demographics: $70\%$ are female; sharp increase among self-employed and those aged $25-39$.

  • Potential Causes: Stress from new technologies (WhatsApp, Zoom), vicious circles in small firms, more stringent labour market exit routes (e.g., harder early retirement), and doctor prescription behavior.

Future Outlook: Labour Market Tightness

• Shift in Policy focus: Modern labour markets (especially in Flanders) are experiencing extreme tightness (e.g., vacancies in education and care).

• Policy Evolution: Moving from "protecting jobs and fighting unemployment" to "finding workers for open vacancies."

• Potential Solutions: Migration is identified as a possible solution to address labour shortages.