To compound this, there are monumental demographic shifts underway: The working-age population is shrinking as the ranks of senior citizens grow.
In this face of this predicament, social policies can no longer be seen as simply a net to catch citizens should they fall. Rather they must be designed to improve peoples’ skills and capabilities, bolstering them in both their professional and social lives.
Enter the concept of social investment. The term itself speaks of a new age in which what society gets back – its return on investment, as it were – is as important as what it gives.
But beyond the financial language, social investment is all about people. It covers such fundamental areas as education, childcare, healthcare, training and job-search assistance.
France Stratégie has teamed up with the National Family Allowances Office (CNAF), the General Directorate for Social Cohesion (DGCS), The Paris Institute of Political Studies’ Laboratory for Interdisciplinary Evaluation of Public Policy (LIEPP) and the Apprentis d’Auteuil Foundation to explore the challenges social investment faces in a series of conferences on social investment throughout 2016. The first one took place on January 26, 2016, setting the stage by defining the principles of social investment and the hurdles it faces in Europe and beyond.
It also looked at what the impact of a social investment strategy and policies could be and the outlook for France. Partner organizations included
Investing in people: A priority for the EU
Social investment is clearly a priority for the EU as is evidenced by its flagship Europe 2020 initiatives, the European Platform against Poverty and Social Exclusion and the Agenda for New Skills and Jobs.
In essence, as the Commission details, social investment focuses on ensuring social protection systems respond to people’s needs and preclude dire social conditions that lead to higher social spending.
Moreover, it better targets social policies and develops active inclusion strategies, covering quality childcare and education, training and job assistance, and accessible healthcare.
New challenges such as the increasing ranks of the impoverished, be they unemployed, the working poor or single-parent families mean that the traditional logic of simply insuring against social risk is no longer enough.
Indeed, social investment seeks to prevent the rise of social ills by empowering citizens. Seen in this light, society doesn’t simply spend on its most vulnerable; it invests in them for the future.
“Individuals are equipped not merely compensated,” stressed Frank Vandenbroucke, professor, University of Amsterdam. “Equality of opportunity trumps equality of place, and services are collective rather than simply monetary allowances.”
In this way, social investment aims to break the vicious circle of social determinism. For Anton Hemerijck, professor, University of Amsterdam, this is a common narrative for Europe.
Ultimately, the goal is to enhance society’s human capital – i.e. the skills, knowledge and creativity that individuals accumulate through education, work and life experience – by ensuring people can weather transitions in their careers and lives.
More than one approach
Other countries’ experiences show there are not one but many social investment strategies. Jon Kvist, professor, Roskilde University, Denmark, presented the Danish social model. He pointed out the success of the model lies in its ability to mobilize pluridisciplinary teams to form an “agile administration” geared to a sole objective: “autonomy at all ages in life”.
Danish success in housing policy is a case in point of the country’s successful social policies. The priority given to the most vulnerable groups has allowed young people who’ve just entered the job market to obtain housing and senior citizens to remain in their homes.
Kvist stressed that a key element of Danish social policy is it’s evidence based. Moreover, the country doesn’t use the term “social investment”; they simply practice it.
Iain Begg, professor, European Institute, LSE, detailed the British experience, where the difficulty of identifying the benefits of social investment and measuring human capital has shaped UK social policy.
This perhaps empirical approach led to Gordon Brown’s US-inspired welfare-to-work approach, where benefits were made conditional. Today, David Cameron’s Big Society programme has emphasized decentralization, inclusion and integration and, for the first time, a living wage.
Outside of Europe, Canada has a complex two-tier system, where the federal government in Ottawa sets the trends for social investment but the provinces flesh out the policies on the ground. Denis Saint-Martin, professor, University of Montreal, pointed to Quebec’s success at staving off inequality when compared to the rest of Canada through high public spending and strong unions.
The flipside of its social corporatism is a system of insiders and outsiders: immigrants often suffer high unemployment and end up leaving to Toronto or Vancouver where a more flexible system provides them job opportunities.
Germany, for its part, has been the EU’s laboratory for emblematic and ambitious labour and educational reforms. Despite this,Silke Bothfeld, professor, Bremen University of Applied Sciences, highlighted the country’s social record has been mixed.
While it has improved its scores on the OECD’s international PISA tests, its educational system leaves little leeway for unorthodox paths and inequality persists. Unemployment has gone down but at the cost of increasing job insecurity and part-time work (in particular for mothers).
This record shows the difficulty of reconciling three sometimes contradictory goals of social investment policy: equality, productivity and individual autonomy.
Gauging and taking stock
Hemerijck put forth that what counts at the end of the day is correlation between the unemployment rate and social spending. In fact, social investment supports employment-oriented economic growth more than any competing policy theory and seemingly mitigates the Matthew effect (i.e. accumulated advantage).
David Halpern, national adviser, What Works, Cabinet Office, UK, has successfully applied behavioural economics and psychology to enhance the efficacy of British social policy. What Works not only evaluates policy but also strives to disseminate the results of evaluations.
Two central tenants of this approach are so-called radical incrementalism and nudge theory. The former consists of picking apart policy and testing elements and alternatives to get improvements. The latter posits that positive reinforcement and indirect suggestions can achieve voluntary compliance.
This pragmatic approach was seconded by Michel Houdebine, economist, Directorate General of the French Treasury. What counts is evaluating the results of different social spending on micro and meso levels.
Luc Behaghel, associate professor, Paris School of Economics, concurred that decision making needs to be supported by measuring the impact of social policy, with transparent evidence “when market demand does not guide investments.”
However, the rub lies in the measuring. As Mireille Elbaum, president, High Council on the Financing of Social Protection, pointed out, using the unemployment rate, for example, to gauge success of social policy ignores the question of quality.
The case of France
It is clear there is a problem of efficient allocation of French social spending. The country’s social investment expenditures are in line with the European average. Yet, as Marine Boisson-Cohen, policy analyst, France Stratégie, and Catherine Collombet, deputy director, National Family Allowances Office, stress, French performance is mediocre when it comes to the unemployment and NEET ( Not in Education, Employment or Training) rates and inequality.
When childcare and training are considered, France performs even worse. For example, it ranked 21 out of 23 countries tested for adult literacy in 2013 in the OECD’s Programme for the International Assessment of Adult Competencies (PIACC). These results raise the question of the efficiency, equity and quality of French social policies.
Michael Förster, policy analyst, OECD, reminded the conference attendees that comparisons should be taken with a grain of salt as they can obscure the singular and not linear nature of developments in any one country. He pointed to inequality. While it had in fact increased in France from 2007-10, Sweden saw the largest increase, with a level approaching that of France.
Moreover, he maintained that the worsening social performance of European countries went beyond social investment: it is above all linked to a steep decline in redistribution of income since the mid-90s.
Beating back inequality – and in particular the educational inequality highly prevalent in France – will require a fiscal reform at the same time as investment in human capital.
Franck Von Lennep, director, Directorate for Research Studies, Assessment and Statistics, Ministry of Social Affairs, stressed the risk in France of looking at social investment through a productivist prism. Healthcare, for example, is not always counted as social investment largely because of the difficulty of seeking to distinguish between remedial and preventive care.
Focusing on the needs of citizens to develop effective indicators should be the starting point rather than beginning with a prescriptive, established framework. This is particularly true with respect to youth, maintained Françoise Bouygard, director, Directorate for Coordination, Research, Studies and Statistics, Ministry of Labour.
Beyond “equipping” individuals, she continued, France as a country has to ask itself what type of society it aspires to be and what sort of work-life balance it wants.
Since the election of François Hollande, France has undertaken several important educational reforms. “How much have we invested and to what end?” asked Nathalie Mons, president, National Council for the Evaluation of the Education System. Education spending has increased substantially, reaching around 8% of GDP, but the results have been decidedly lacklustre.
While 88% of young people now obtain a high school diploma and the NEET rate has gone down 10%, substantial inequality persists. The fact remains, France today has one of the most elitist educational systems in the world, with two-tier post-secondary schooling that serves to perpetuate inequality of opportunity in the job market.
Indeed, elementary schools are underfunded while the so-called preparatory classes (post-secondary programmes that prepare students for the “grande école” system, which dates back to the French Revolution) are clearly overfunded.
Looking beyond education, Julien Damon, associate professor, the Paris Institute of Political Studies, highlighted the interest of social investment lies in being able to prioritize spending on a financial basis. In short, it is a means with which to save a model of social protection under grave threat.
The finality of education is gainful employment. Michel Servoz, director general, General Directorate for Employment, Social Affairs and Inclusion, European Commission, emphasized that high unemployment and NEET rates remain a major problem for France to overcome.
Economic resilience through social investment
Regardless of the different viewpoints expressed, there was a strong consensus that a major hurdle when it comes to social investment is measuring the benefits of social policies. Servoz stressed the need to develop tools to weigh the end results of social spending.
Daniel Lenoir, director general, National Family Allowances Office, emphasized that social investment shouldn’t embolden critics who see it as a means to justify deficit spending. That said, Nicolas Truelle, director general, Apprentis d’Auteuil Foundation, cited aid to single-parent families as an example of the benefits of a policy that are difficult to gauge.
In the future, the economic calculus should shift to what the costs are for society of inequality or high school dropouts, for example. Furthermore, just as a company’s spending on R&D is seen as an investment and not a cost, so too should the state’s spending on education or training, added Jean-Philippe Vinquant, director general, General Directorate for Social Cohesion, Ministry of Social Affairs.
Bruno Palier, co-director, LIEPP, the Paris Institute of Political Studies, stated what is needed is a rigorous common lexicon. This goal of this is not to differentiate between good or bad spending but rather to determine what hinders and what fosters social investment. Putting a figure on the results comes at a later stage.
Creating a benchmark of international good practices will bolster this process, pointed out Jean Pisani-Ferry, commissioner-general, France Stratégie. Perhaps more importantly, social investment must be made operational.
A key element for this to happen is adequate financing. France’s future investments programme (PIA), which consists of some €22 billion for secondary education and research, is an example of a means with which to finance social programmes.
Lest we forget, Servoz concluded, the countries that have been the most resilient throughout the economic downturn have been those that have strong social spending, investing in education and training and helping their citizens transition and weather the economic storm.