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What is ‘New’ in the New Governance of Activation? A Comparison between Italian

and Finnish Labour Market Policy Reforms

Simone Scarpa1 The paper aims at questioning to what extent an exclusive focus of comparative research on the ‘technical/mechanical’ and ‘political’ elements of activation policies allows an estimation of cross-national convergence and/or divergence of welfare state restructuring dynamics. So far, many comparative studies of activation policies seem to have somehow inherited what has been considered as the major fault of workfare programmes: the underestimation of the demand-side conditions in the labour market. Still, a preliminary consideration of the ‘socio-structural’ conditions in which activation policies are implemented is necessary in order to understand the reasons for cross-national differences. The paper develops this argument by comparing labour market policy reforms in Finland and in Italy. In both countries, in the last years, welfare reforms attempted, on the one hand, to establish more integrated systems of activation policies and, on the other, to introduce new forms of partnership relations between public and non-public actors. Still, many of the ‘technical/mechanical’ and ‘political’ differences between the Finnish and the Italian approaches to activation can be still explained against the background of the different possibility for public authorities of the two countries to actively promote the creation of low-skilled, low-paid jobs in the labour markets.

1. New policy instruments, new policy paradigms? Many studies have questioned to what extent it can be argued that, in the last decades, the diffusion of active labour market policies across different European countries effectively resulted in the emergence of a common, cross-national welfare reform agenda. With some approximation, comparative studies of activation policies an be divided in three subgroups, according to the different importance that they have assigned to the ‘technical/mechanical’, ‘political’ and ‘socio-structural’ elements of convergence and/or divergence (Saltman, 1997). A first group of studies mainly focused on the changes in the operation of labour market policies caused by the introduction of what may be defined as new “policy instruments”, i.e. as socio-technical devices that are expected to establish new types of relations between welfare state institutions and citizens (Lascoumes and Le Gales, 2007). These studies found signs of convergence of labour market policies in the cross-national diffusion of similarly-functioning “instruments of activation” (Konle-Seidl and Eichhorst, 2008) and “new modes of governance” (van Berkel and Borghi, 2007), such as those based on decentralization, public-private partnerships, individualization/contractualization of relations between welfare state institutions and beneficiaries, etc. From this perspective, changes in the procedural functioning of welfare systems are seen as able to bring about important consequences for the formal contents of social policies and, accordingly, for the

1Department of Sociology and Social Research, University of Milan-Bicocca, Italy. scarpa.simone@gmail.com

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organization of broader social relations in a society (cf. Newman, 2007). However, these comparative studies that have solely (or mainly) focused on the ‘technical’ features of activation seemed to underplay the extent to which policy instruments may be altered in the same way while, at the same time, overall goals may continue to vary or even remain unchanged (cf. Hall, 1993). Rather than conceiving policy instruments as not necessarily linked to specific policy paradigms - or, alternatively, as applicable to a broad range of different policy paradigms -, these studies seemed, sometimes, to consider the introduction of the former as the evidence of the (at least partial) convergence of the latter (cf. Gilbert, 2002). A second group of scholars have instead focused the attention, on the one hand, on the cross-national spreading of certain norms and values of solidarity - i.e. on what can be considered as ‘political’ elements of convergence/divergence – and, on the other, on the relationship between the latter and the institutional differences between national approaches to activation. By and large, these comparative studies have distinguished between two somehow antithetic notions of activation: a ‘neoliberal’ type of activation policy, associated to the welfare-to-work programmes introduced in countries of Anglo-Saxon tradition, which would predominantly imply the introduction of economic sanctions and coercive measures, as opposed to an ‘universalistic’ type of activation, found in Northern-European countries, which instead would primarily incentivize job-seeking activities through the participation and the empowerment of the unemployed, while assuring decent standards of living to benefit recipients (Barbier, 2004; Torfing, 1999). Still, ‘typologies’ of activation have not been developed, so far, by analyzing of a set of empirical indicators from which an evidence of cross-national divergence (and/or convergence) may be provided but, rather, by giving personal views on the political and ideological conceptions of unemployment which (may) have inspired reform processes in different countries. Accounts of cross-national variation have been thus characterized by disagreement among researchers in the interpretation of the effects of activation reforms in different countries. Accordingly, attempts to fit countries into typologies have also proven to be exposed to proponents’ discretion. A case in point of this disagreement has been represented by the definition of certain approaches to activation as ‘universalistic’. For instance, Håkan Johansson and Björn Hvinden have underlined how, even in Nordic countries, unemployed citizens have been traditionally submitted to rather strict work requirements in return for benefits (Johansson and Hvinden, 2007a; Johansson and Hvinden, 2007b). Further, these scholars argued that the recent creation, in all Nordic countries, of an additional ‘local’ tier of activation policies seemed to have contributed to the consolidation of a dualism between activation policies for unemployed who receive (insurance-based) unemployment benefits and labour market measures targeted at individuals who instead primarily rely on (means-tested) social assistance benefits. While, according to this view, Nordic welfare systems would have retreated from universalistic principles, some scholars have instead identified a partial, attempted shift towards universalism in the recent reform of labour market policies in Italy (Barbier and Ludwig-Mayerhofer, 2004; Borghi and van Berkel, 2007). A recent study has even interpreted the political implications of the ‘active’ recalibration of social policies at the local level, within certain Italian regions, in terms of “full accomplishment of social citizenship, in particular with respect to well-being and health rights” (Bifulco et al., 2008:154).

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The examples of Finland and Italy clearly indicate how the adoption of the concept of universalism in comparative research on activation policies tends to be open to alternative interpretations and, for this reason, rather problematic. In fact, it seems unlikely – or, at least, surprising - that, in the present phase of welfare state restructuring, while Nordic countries have abandoned universalism, Italy may have expanded social citizenship rights (even if just for a limited period or just in certain geographical areas). By and large, the theoretical approaches taken into account until now seem to have all somehow ‘inherited’ what has been considered to be the major fault of workfare programmes introduced in the Anglo-Saxon countries: the focus is exclusively placed on the supply-side of the labour market - i.e. on the ways in which the functioning of social policy arrangements is (or can be) redesigned in order to more successfully help (or force) the unemployed to get a job - but what happens in the demand-side is not adequately taken into account (Solow, 1998; Sunley et al., 2006; Theodore, 2007). Accordingly, the aforesaid studies have given little consideration to the possibility that the cross-national diffusion of activation policies may have also been influenced by factors of a more ‘socio-structural’ kind and related to changes in the labour market, rather than solely to changes in the ‘technical’ operation of welfare arrangements or in the ‘political’ understanding of the causes of unemployment. An exception in this regard has been represented by a third group of comparative studies which have instead hypothesized that the cross-national diffusion of activation principles and practices may be related to what can be defined as changes in the “long-termed fixed characteristics of a society” (Saltman, 1997:450). By adopting different theoretical perspectives, these studies have seen the cross-national diffusion of activation discourses and approaches against the background of the changes in labour market conditions caused by the emergence of a new, ‘post-industrial’ social order. The common assumption of all these studies is that the diffusion of non-standard forms of work and the growing instability of employment relations required (and somehow caused) a subsequent adaptation of social protection systems (Clasen and Clegg, 2006; Peck, 2001). However, what has been often overlooked is that the relationship between labour market transformations and welfare systems cannot be construed as unidirectional since, in their turns, welfare systems can play an important role in directing economic and social change and, for this reason, they can influence (country-specific) paths towards the service economy (Esping Andersen, 1992). The effects of the post-industrial transformation of economy tend in fact to be mediated by pre-existing institutional structures and, accordingly, policy responses tend to exhibit distinct ‘patterns’. Of central importance in this respect are the ways in which welfare systems respond to dilemma of the ‘cost disease’ arising out of the productivity gap between the ‘non progressive’ labour-intensive service sector and the ‘progressive’ goods-producing sector (Baumol, 1967). Since the former tend to gain productivity slower than the latter, wages in the service sector need to go down or public resources need to be used in order to fill the productivity gap between the manufacturing sector and the service sector. For this reason, according to Torben Iversen and Anne Wren, welfare systems are just able to satisfy only two out of three of the following strategic goals: wage equality, employment growth and budgetary restraint (Iversen and Wren, 1998). In the Nordic countries the gap in the productivity between progressively and non-progressively growing sectors has been somehow ‘filled’ by the development of a public service infrastructure which, on the one hand, provides decently-paid and secure jobs even for individuals with relatively low levels of educational attainments but, on the other, depends upon high levels of revenue capacity

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and expenditure needs. In the Anglo-Saxon countries, low-pay jobs are instead more common, especially in the private service sector industry, and they are associated with a comparatively higher level of income inequality but also to a relatively lower level of social expenditure. In the countries belonging to the conservative-corporatist ‘typology’, low levels of wage dispersion in the labour market are not associated with high levels of employment but, unlike the universalistic regime, with fiscal moderation. In the framework of this paper, the hypothesis of the existence of a welfare regime-specific ‘trilemma’ of the service economy may help to provide an explanation of the ways in which activation policies are developed and implemented in different national contexts. The main argument of this paper is in fact that the number and the types of job-opportunities available to participants in active labour market programmes are influenced by the institutional constraints imposed by country-specific labour market systems but, on the other, they also tend to be related to the ‘political’ and ‘technical/mechanical’ characteristics of activation. By taking specifically into account the Italian and the Finnish cases, this paper aims at explaining how a preliminary analysis of country-specific forms of regulation of labour market systems may bring light on the causes of cross-national differences in the strategies aimed at tackling unemployment, in general, and in implementation of ‘new’ modes of governance of active market policies, in particular. It has been argued that employment policies aimed at restricting the possibilities for unemployed individuals to refuse low-paid jobs may be an option only for those countries, such those belonging to the ‘liberal’ welfare regime type, whose labour market systems are characterized by stark income inequalities but also by ample employment opportunities (Iversen, 2005). By contrast, in the Finnish context, unemployed cannot be easily ‘pushed’ into the labour market due to the limited availability of low-paid jobs in the private service sector. This hypothesis has been confirmed by a recent study that showed how, in the last years, there has not been any sign of the expansion of a low-paid segment of the labour force in this country (Airo et al., 2008). Still, it is not clear what the ‘trilemma’ really means for a country like Italy that, in line with the welfare regime theory, is characterized by low employment and labour market participation rates and also by a segmentation of the unemployment security system which is likely “to generate serious tensions along the ‘insider-outsider’ axis” (Esping Andersen, 1992:141). There are reasons to believe that Italy, together with other Southern European countries, may belong to a distinct, ‘Mediterranean’ typology which is characterized by a comparatively higher level of segmentation of unemployment benefits and, above all, by the weakness of social assistance institutions in the income maintenance of unemployed and poor (Leibfried, 1992; Gough et

al., 1997; Ferrera et al., 2003). In the countries belonging to this Mediterranean typology, existing inequalities in employment protection schemes seem to be further exacerbated by a level of labour market segmentation that historically tended to be higher than in countries of continental Europe (Mingione, 1995). As explained more in the detail in the following pages, the Italian path towards a ‘post-industrial’ economy seemed to be characterized by an intensification of the pre-existing level of labour market segmentation. Somehow paradoxically, the Italian case seem thus to be characterized, on the one hand, by the availability of low-paid jobs which seem to be somehow suitable for ‘typical’ target groups of workfare programmes (such as social assistance recipients) but, on the other, by the absence of a nationally-regulated social assistance scheme. Given the absence of what is

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usually regarded as the ‘optimal’ target group of workfare policies (i.e. social assistance beneficiaries), some scholars have even questioned to what extent it can be argued that, in the last years, the Italian welfare system may have experienced a shift towards activation (van Berkel and Møller, 2002). As mentioned before, this view has been more recently challenged by other studies which have stated that the recent development of activation policies in Italy constituted an at least partial break with previous policies and practices. Against this background, it seems interesting to compare the Finnish and the Italian cases in order to verify to what extent recent trends represent a shift from the past and indicate the emergence of a convergence process, due to the retreat from universalistic principles in Finland and the contemporaneous strengthening of social citizenship rights in Italy. In order to do so, in the next section of this paper, labour market dynamics in the two countries, from the beginning of the 1990s onwards, will be analyzed. The third section of this paper will instead focus on recent labour market policy reforms in the two countries. Next, the attention will be placed on two issues in particular which, in the last years, gained attention in comparative research on activation policies: the diffusion of strategies of integrated services delivery (i.e. ‘cross-departmental’ initiatives established within the public sector) and the institutionalization of partnership relations between public and non-public actors (e.g. for the re-skilling of long-term unemployed and/or for the creation of jobs in the ‘social economy’ sector). Hence, it will be explained how, despite the apparent convergence of the ‘watchwords’ which seem to have inspired recent reforms in the two countries, the ‘technical/mechanical’ and ‘political’ differences between the Finnish and the Italian approaches to activation can be seen against the background of the different possibility for public authorities to actively promote the creation of low-paid jobs in the labour markets.

2. Labour market dynamics in the aftermath of the economic crises of the early 1990s:

a comparison between Finland and Italy Although for different reasons, at the beginning of the 1990s, both Finland and Italy had to cope with extremely difficult economic and social situations. The welfare reforms of the 1990s can be seen against the background of the unfavourable concomitance of domestic and international events which occurred at the beginning of that decade and somehow functioned as a ‘trigger’ for the subsequent development of structural adjustments and social policy changes. While in Finland the 1991 crisis was the consequence of the financial liberalization of the 1980s, which fuelled a decade of debt-financed economic boom, in Italy the 1992-1993 recession was instead mainly caused by the collapse of a growth mode based on a combination of rising public debt, on the one hand, and worsening current account deficit, on the other. The financial situation of both countries had been further deteriorated by an acceleration of inflation and, above all, by the decision of central governments to keep interest rates high in order to defend the value of the national currencies (the markka in Finland and the lira in Italy). When the latter were threatened by speculative attacks, the central governments of the two countries were forced to opt for devaluations. In Italy, the central government was also obliged to leave the exchange rate

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Figure 1. Annual GDP growth (in constant prices, OECD base) and unemployment rates, Finland and Italy,

1990-2007

Source: OECD statistical database (stats.oecd.org)

mechanism of the European Monetary System. Still, in this country, the strong devaluation of lira brought about an increase in the exports of domestic firms and, in the short term, contributed to a more favourable positioning of the national economy in the world market2. By contrast, in Finland, the devaluation, together with the contemporaneous collapse of the Soviet Union (which at that time was the most important trade partner for domestic firms), laid the foundation for the worst economic crisis of the country’s history. Hence, in Finland, the crisis had a more tangible impact on all the sectors of the economy and on the whole society, causing a considerable fall in GDP (-6.2% in 1991) and, subsequently, a dramatic increase in the in the unemployment rate (almost 17% of the labour force in the years 1992-1993). As shown in Figure 1, Italy suffered of a minor increase in the unemployment rate than Finland: throughout the 1990s, the former country has been always characterized by lower unemployment rates, except for the years 1999-2000. What is also interesting is that even when, from the mid-1990s onwards, Finland began to show better economic performances, Italy seemed to continue to fare better in reducing the unemployment level. In the year 2007, the unemployment rate in Italy was not only lower than the 1990 level but also still lower than the corresponding Finnish value (which, instead, was still more than two times higher than the 1990 level).

2 In a few years, in Italy, the 1992 current account deficit of 30 billion dollars became a current account surplus of almost equal size in the year 1995 (about 25 billions dollars). Also Finland seemed to benefit from devaluation and, after a decade long trend of current account deficit in 1980s, industrial production to recovered rapidly from 1994 onwards. However, until the end of the 1990s, yearly current account surpluses in Finland remained lower than Italian ones, even if the situation was soon going to be reversed at the end of the decade (own calculations from OECD data).

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Figure 2. Employment growth and labour productivity growth in Finland, 1991-2007

Source: OECD statistical database (stats.oecd.org)

Figure 3. Employment growth and labour productivity growth in Italy, 1991-2007

Source: OECD statistical database (stats.oecd.org)

The greater capacity of Italy to expand occupation in the period 1991-2007 is evident by comparing Figure 2 and Figure 3, which show the annual labour productivity growth and the employment growth, measured by taking into account the absolute number of employees and using 1990 as base year. Despite the dramatic crisis, average labour productivity continued to grow in Finland but pre-crisis levels of employment could not be restored until the year 2007. Hence, in this country, the economic recovery which occurred in the second half of the 1990s did not seem to be automatically linked to a job-creation effect. On the contrary, lower labour productivity growth in Italy seemed to be accompanied by a more pronounced employment growth and, in fact, the pre-crisis number of employees had been already restored (and, thereafter, even outnumbered) in the year 2000. Summarizing the discussion so far, while Finland, from the second half of the 1990s onwards, witnessed a

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marked economic growth which did not seem to be associated to a significant employment growth, Italy was instead characterized by an increase of the absolute number of employees in the context of declining economic and productivity growth rates. Therefore, whereas Finland seemed to follow a ‘jobless-growth’ path, the latter country seemed instead to experience what has been defined as a process of ‘growth-less’ job-creation (cf. Boeri and Garibaldi, 2007). During the period in question the two countries were marked not only by different economic and employment growth dynamics but also by a simultaneous transformation of the compositions of their respective employed and unemployed populations. In the year 1991 long-term unemployed were 68.1% of the unemployed population in Italy and only 9.2% of the total in Finland, while youth unemployment (individuals between 15 and 24 years of age) accounted for almost half of the total in the former country and for one-third of the total in the latter country. Figure 4 shows how in the mid-1990s, while Italy recorded a decrease in the shares of both long-term and youth unemployment rates, Finland instead showed a smaller share of youth unemployment but also a larger proportion of long-term unemployment (if compared to the 1991 level). Until the year 2005, the differences between the two countries continued to narrow: in that year, in Italy the share of long-term unemployed in overall unemployment was further reduced to 52.2% while in Finland it was equivalent to about one fourth of the total (hence this value remained higher than the 1991 value). On the other hand, the shares of youth unemployment in the total were reduced in both countries. In sum, in Italy, declining economic growth rates were accompanied by a reduction of the shares of both long-term and youth unemployment on total unemployment while, in Finland, the faster and more-sustained economic growth recorded in the second half of the 1990s seemed to contribute to a decrease of the share of youth unemployment but also to a simultaneous increase of the share of long-term unemployment on the total unemployed population. These parallel trends suggests that in Finland, in the second half of the 1990s, labour market conditions changed in such way that it became easier for young individuals to find an occupation while, in the meantime, employment prospects of older workers deteriorated, leading to longer employment spells. The hypothesis that the changes that occurred in the Finnish economic structure may have somehow contributed to the worsening of labour market conditions of older workers is further confirmed by a look at employment rate dynamics in the period after the economic recession. Figure 5 shows how,

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Figure 4. Youth unemployment (individuals aged 15 to 24 years old) and long-term unemployment (over 1 year),

as percentages of total unemployment, Finland and Italy, years: 1990, 1995, 2000 and 2005 Source: OECD statistical database (stats.oecd.org)

Figure 5. Female employment rate and employment rate of older individuals (55 to 64 years), Finland and Italy,

years: 1990, 1995, 2000 and 2005

Source: OECD statistical database (stats.oecd.org)

after the eruption of the crises, both female employment rates and employment rates of older workers decreased in both countries. Under the welfare regime hypothesis, Nordic countries are expected to be characterized by higher labour market participation rates among women and older workers, while conservative-corporatist countries are instead expected to be characterized by the predominance of the ‘male breadwinner’ family model, based on a combination of traditional division of roles between genders and ‘suboptimum’ activity rates (among women and middle-aged workers in particular) (Esping Andersen, 1996). The figures show that while the two countries continued to maintain large difference between their respective female employment rates, in the mid-1990s, Finland exhibited an employment rate of older workers (aged 55-64) that was more in line with those of the

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countries belonging to the conservative-corporatist cluster3. An explanation for this can be given by the fact that, after the recession, Finnish economy underwent a structural transformation that led to a shift in favour of higher-skilled forms of production and to a sharp decline in labour demand for individuals with obsolete skills. The technological upgrading of the Finnish economic structure seemed to make more difficult for elderly workers to meet the qualification requirements demanded for available vacancies in the labour market, when the old jobs disappeared and new jobs, demanding new skills, were created (Huovinen and Piekkola, 2001). Unlike Finland, changes in labour market conditions in Italy did not seem to create trade-offs: all segments of the working age population who previously had to face difficult barriers to employment (such as young adults but also, to a lesser extent, women) saw a simultaneous improvement of their position in the labour market. In the next section, it will be explained how welfare reforms differently accompanied the structural adjustments of the economies of the two countries by analyzing labour market policy measures that have been undertaken by the Finnish and Italian central governments in order to cope with the economic crises of the early 1990s.

3. Different trajectories of structural adjustment: Finnish and Italian labour market

policy reforms, 1990-2005 In the aftermath of the recession of the early 1990s, central governments of both countries were forced to intervene to stabilize their economies as well as to attempt to restore the international competitiveness of domestic firms. Still, while the Finnish right-wing government, owing the opposition of trade unions, failed to adopt a strategy aimed at cutting labour costs through deregulation, this very strategy could instead be pursued in Italy by means of a series of wage-moderation agreements between the governments of those years and social partners. The economic situation in Finland was probably worse than in Italy since the former country had been historically characterized by the ‘one-sideness’ of the export structure which, in fact, had been long dependent on a single dominant sector (forest and wood-processing industry) as well as on a single trade partner (that, at that time, did not exist anymore: former Soviet Union). The centre-conservative cabinet established in 1991, when the crisis was at its deepest, enacted a social pact, consisting in a wage freeze and budgetary cutbacks in public expenditure but it was forced to abandon a project of labour market deregulation, which would have made more convenient for employers to hire young unemployed, by the opposition of the trade unions (Timonen, 2003). From 1995, a new social democratic-led government called for closer cooperation between the state and social partners and decided to adopt a value-added strategy of economic recovery based on the improvement of the technological competitiveness of the industrial sector. A few state-run companies were privatized in order to obtain the economic resources necessary to increase expenditure in R&D (Benner, 2003). In the period between 1995 and 2005, the share of total R&D expenditure thus increased from 2.3% to 3.5% of GDP (in Italy, during the same

3 The low employment rate of Finnish elderly workers cannot be fully attributable to the large number of unemployed job-seekers but needs to be interpreted, at least in part, as a by-product of the existence of early retirement options (Hytti, 2006).

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period, it only increased from 1% to 1.1%)4. In Finland, this innovation-driven strategy met the favour of the trade union movement, whose members were in fact concerned that a restoration of the competitive edges of the traditional ‘core’ industries would have been otherwise achieved by means of cost-saving labour market reforms (Orston, 2006). The strategy of economic recovery pursued in Italy could be instead described as an example of “selective and shielded deregulation”, i.e. as a strategy aimed, on the one hand, at preserving social protection levels for workers of the ‘core’ (and more unionized) sectors of the economy and, on the other, at allowing the flexibilization of labour market conditions in the other sectors of the economy (and, above all, in the growing private service sector) (Iversen, 2005). Changes in the labour market legislation in 1993 (by the ‘technical’ government headed by Carlo Azeglio Ciampi, former governor of the Bank of Italy) and, above all, in 1997 (by Romano Prodi’s first centre-left coalition government) and in 2003 (by Silvio Berlusconi’s second rightwing coalition government) encouraged a more widespread use of non-standard contracts, by reducing the costs of social security provisions and by abrogating previously-existing rules on hiring and firing which had long discouraged their diffusion. These reforms significantly contributed to the employment growth recorded at the turn of the century, especially by increasing employment amongst young adults and women. Still, many of these ‘new’ employees tended to receive lower wages than those of standard salaried workers and, above all, to benefit from a lower level of social protection. During the period in question, the increase in the risk of having precarious and/or low-income work histories for young individuals seemed to be associated with the widening of intergenerational income inequalities (Barbieri and Scherer, 2009). By and large, during this phase, employment growth in Italy did not seem to be driven by a competitive strategy of ‘product innovation’ (like the Finnish one) but rather by a strategy of ‘process innovation’ predominantly (if not solely) based on “defensive adaptations at the expense of

Figure 6. Level of protection against dismissals for regular employees and strictness of employment protection

legislation for fixed-term contracts, Finland and Italy, 1990, 1998 and 2003

Source: OECD statistical database (stats.oecd.org)

4 Calculations from EUROSTAT data.

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weaknesses in the shape of small average firm size, a reliance on price competitiveness and a disadvantaging of more capital- and research-intensive sectors” (Dunford and Greco, 2006:290). As seen before, this strategy of labour cost reduction indirectly contributed to the labour market integration of social groups previously excluded by the Italian labour market (or even absent in it: such as immigrant workers, whose number rapidly increased in the last years). As shown in Figure 6, the effects of recent labour market reforms were somehow antithetical in the two countries, in terms of flexibilization of working conditions. In Finland, the level of strictness of employment protection for fixed-term contracts remained unchanged in the period 1990-2003 while, on the contrary, standard contracts were made more flexible for what concerns the stringency of dismissal regulation. Fixed-term contracts were instead steadily made more ‘flexible’ in Italy than in Finland, while the level of protection against dismissals for standard contracts remained unchanged (but it is lower than in the latter country). Summarizing the discussion so far, trajectories of post-industrial development in the two countries seemed to differ considerably in the ways in which central governments decided to influence the structural adjustment of national economies in the period after the crises of the early 1990s. Finland seemed to prioritize an innovation-based transformation of the economic structure at the expenses of higher structural unemployment, while Italy attempted to sustain the export boom triggered by the EMS crisis of 1992-1993 by means of a wave of cost-saving labour market deregulation measures which, indeed, prompted employment growth. Between 1991 and 2001, Italy was one of the few EU15 countries (together with Austria and Germany) to experience a decline in full-time, permanent employment (OECD, 2003:49). While in the year 1997 the share of temporary employment on total employment was still of only 8.2% in Italy and of 18.3% in Finland, in 2007, corresponding values were of 13.4% in the former country and of about 16% in the latter country (i.e. differences between the two countries decreased from +10.1 to +2.6 percentage points in a period of ten years)5. It is also important to remark that while public employment continued to account for a considerable share of total employment in Finland, this did not happen in Italy since, from the early 1990s onwards, public sector employment played a minor role in job creation than during previous periods of economic turmoil and restructuring (Brandolini et al., 2006)6. Another important difference between the institutional developments in the two countries was given by the fact that, in Finland, the reform of minimum income schemes, in 1993, introduced a new flat-rate benefit (työmarkkinatuki, or ‘labour market subsidy’), specifically designed for individuals who cannot gain access to the insurance-based component of the unemployment security system. This reform caused a reorganization of the Finnish unemployment security system, since the ‘labour market subsidy’ replaced the municipal social assistance (toimeentulotuki, or ‘living allowance’) as the ‘exit scheme’ for those whose entitlement rights to unemployment benefits run out and as the income-maintenance

5 Calculations from OECD statistical database (stats.oecd.org). 6 For instance, in the year 2006, public sector employment accounted for about 27% of the total in Finland while corresponding value was of 15% in Italy (calculations from ILO-LABORSTA database).

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benefit of first-time labour market entrants (Hansen, 1998)7. The reasons for the enactment of this reform can be explained not only by the necessity to cope with rising unemployment rates but also by the fact that, as a consequence of the extension of contribution and membership conditions for unemployment benefits, the growth of unemployment was accompanied by an increase in the demand for social assistance benefits and, accordingly, resulted in an greater than before burden on the municipalities (Kosonen, 2001). The labour market subsidy was meant to alleviate this burden since this scheme is administered by the employment offices but financed by the National Insurance Institution (KELA) and can be received for a (virtually) unlimited period of time. After the enactment of the 1993 reform, in Finland social assistance came to be more and more used as a compensation benefit for individuals who are already in receipt of the labour market subsidy: almost half of unemployed in receipt of municipally-provided social assistance are in fact already entitled to the state-financed labour market subsidy (45.8% in 2005) (Ministry of Social Affairs and Health, 2005). Parallel reforms of the Italian unemployment security system did not seem to be similarly aimed at strengthening social security provisions for long-term unemployed, first-time labour market entrants or for workers on non-standard contracts (Barbier and Fargion, 2004; Samek Lodovici, 2000; Samek Lodovici and Semenza, 2008). The Italian unemployment security system has been historically characterized by a high degree of segmentation of unemployment benefits and by the absence of any (centrally-regulated) last-resort income maintenance or poverty alleviation measure. Welfare reforms of the unemployment benefit system carried out in the 1990s seemed to contribute to the reduction of previously-existing difference between more generous provisions for collectively dismissed workers and less generous provisions for individually dismissed workers. For long time, the ‘wage compensation fund’ (CIG, or Cassa Integrazione Guadagni), originally designed for workers with temporarily reduced working hours, had been implicitly used as an instrument for concealing disguised unemployment. This misuse of CIG has been long incentivised by the fact that the amount this scheme is more generous than ordinary unemployment benefits and, moreover, its provision is not automatic but solely subject to the political intermediation of trilateral negotiations between central government, trade unions and employers. In 1991, a new ‘mobility benefit’ (or indennità di mobilità) replaced CIG for workers who become permanently unemployed as a result of a collective layoff. During the 1990s, the ‘ordinary unemployment benefit’ (indennità ordinaria di disoccupazione) was also changed from an extremely low (and stigmatizing) flat-rate benefit to a proper income replacement benefit and both the replacement rate and the maximum duration of entitlement were increased several times (OECD, 2007). Still, these unemployment schemes are mostly meant to cover a minority of the workforce, represented by full-time workers of ‘big’ manufacturing firms (16 or more employees), in standard open-ended employment relationships, who become involuntary unemployed. Hence, first-time labour market entrants and, above all, most of the growing number of precarious workers on non-standard contracts cannot access the insurance-based component of the unemployment security system. In sum, the inherent ‘dualism’ which historically characterized the Italian unemployment security system was not altered by aforesaid reforms.

7 From the year 1996, individuals under 25 years of age can be made ineligible to labour market subsidy if they decline a job or an activation proposal or choose to not apply for vocational training.

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In this respect, a temporary exception has been represented by the experimentation, between the years 1998-2002, of a new social assistance scheme, the ‘minimum insertion income’ (reddito minimo di inserimento, or RMI) in a few municipalities (306 municipalities out of 8,101). Unlike other residual minimum income provisions already existing in Italy, RMI was meant to be a ‘non-categorical’ guaranteed safety net, i.e. as a benefit targeted at all households whose monthly disposable income was below a predefined threshold8. Unlike Northern-European social assistance measures, the RMI was thus means-tested taking into account the whole household income and, in addition, every member of beneficiary household was required to participate at an activation programme in return for the benefit (Sacchi and Bastagli, 2005). The experimentation of RMI basically aimed at the definition of nationwide homogenous rules of entitlement for the ‘vital minimum’ (minimo

vitale), a social assistance scheme already introduced by the spontaneous initiative of some municipalities, whose eligibility rules historically tended to vary at the local level and to be strongly dependent upon the availability of financial resources. The functioning of RMI basically resembled that of ‘vital minimum’ but the almost simultaneous enactment (2000), during the experimentation, of the new Framework Law on the Realization of an Integrated

System of Social Interventions and Services (law 328/2000) was interpreted by many observers as a substantial improvement in the functioning of the Italian welfare system. It has been argued that this reform meant a radical transformation of the Italian welfare system for what concerns, in particular, the organizational and relational forms in which not only public institutions and non-profit organizations but also clients and service providers relate to each other (Bifulco and Vitale, 2006). The participation of non-profit organizations in public policies was not a new issue in Italy but, with the enactment of the framework law, “(w)hat did make a significant difference (...) was that for the first time, these local actions and initiatives were embedded in a national legal framework” (Borghi and van Berkel, 2007:93). When an almost simultaneous decentralization reform (2001) de facto made the nationwide standardization of social welfare provision impossible and, above all, when the programmed experimentation of RMI was put to an end by second Berlusconi government (2003), the impact of new framework law was ultimately limited to a legitimization of the role historically played by non-profit organizations in social assistance programmes. In particular, the framework law incentivized the ‘integration’ of health and social services and the establishment of local partnerships between public authorities and non-profit organisations (e.g. by conditioning the provision of funds by the existence of such partnerships). What is interesting is that, in the last years, also Finland followed a similar strategy of social services ‘integration’ for the activation of long-term unemployed and, meanwhile, experimented new institutional governance frameworks between public and non-public actors which seemed to likewise incorporate ‘social economy’ principles. In the following pages, the reasons for the apparent symmetry between the reform processes in the two countries will be investigated.

8 In Italy, a number of categorical social assistance provisions are targeted at aged individuals in receipt of pensions of small amount or at households with disabled persons.

15

4. Service integration and public-private partnerships in the governance of workfare:

a comparison between the two countries

The comparative analysis developed in the previous sections described how, in the early 1990s, Finnish and Italian labour markets were hit by severe economic crises, with increases in the unemployment levels and temporary reduction in the international competitiveness of domestic firms. In the second half of the 1990s, despite the stronger recovery of the economy, Finland continued to fare worse than Italy in job creation and, in fact, was characterized by higher unemployment rates. While in Finland the growth in the unemployment level seemed to be associated to changes in the educational requirements in the labour market, in Italy employment growth seemed instead to be accompanied by a simultaneous deterioration of contractual and wage conditions of first-time entrants, compared to those of the rest of working population. Meanwhile, Finnish welfare reforms made more difficult for long-term unemployed to be entitled to (and to maintain the entitlement to) the unemployment insurance but also introduced a new centrally-administered flat-rate scheme which did not require previous contributions. On the other hand, the Italian unemployment security system did not seem to be likewise adapted to changing labour market conditions and, accordingly, workers on non-standard contracts continued to be excluded from the unemployment security system. As seen before, a major difference between the social protection systems of the two countries is given by the absence, in Italy, of a last resort benefit for unemployed people without access to other insurance-based. The only existing social assistance measure, the ‘vital minimum’, in fact is a residual benefit that is only provided to a minority of unemployed. Table 1 and Table 2 allows the comparison of the treatment of different households in need of financial support in the municipalities of Milan and Helsinki. The information was collected through interviews (carried out in the years 2006-2007) with social workers and case-workers who deal with social assistance claimants. In the first place, the tables show how, in Italy, benefit claimants are filtered not only by requiring more serious needs than just economic problems but also by considering family members responsible even for the support of their adult relatives. Unemployment is thus not a sufficient condition to receive the vital minimum since the latter is not considered as a proper unemployment benefit but, rather, as a measure targeted at individuals who have to cope with many social deprivations. For this reason, none of the household types taken into account in the tables would receive any support from the municipality of Milan, while individuals in the same situation would instead qualify for various kinds of public assistance in Helsinki. This seems to explain, in the first place, the surprising difference between social assistance recipiency rates in the two cities: in the year 2003, only 0.07% of the population received the ‘vital minimum’ in Milan (926 out of 1,247,052 residents), while in the same year corresponding value was of 8.7% in Helsinki (48,652 recipients of the ‘living allowance’ out of 559,330 residents)9.

9 Data for Helsinki are from SOTKAnet Indicator Bank, while data for Milan are from Villa (2007).

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Single man (45), unemployment

benefits expired, defaulting

tenant

Low-income household worker

(36), unemployed housewife

(34), three minor siblings (14, 7,

2) (a)

Single mother (19) with a little kid

(2), no education, no saving, no

income, thrown out of her

parents’ house

Unemployed boy (19), no

education, no savings, ‘black’

job, thrown her out of his

parents’ house, defaulting

tenant

Entitlement rules: More serious social deprivations are required (e.g. substance abuse; homelessness; ex-convict; social isolation; etc.)

Household income is too high.

By law, parents are expected to maintain her More serious social deprivations may be required (e.g. substance abuse; social isolation; etc.)

By law, parents are expected to maintain him More serious social deprivations are required (e.g. substance abuse; homelessness; ex-convict; social isolation; etc.)

Amount of the benefit: Provided at the discretion of the

municipal office:

€ 110-350;

None

Provided at the discretion of the

municipal office:

About € 200 (kid) + discretionary compensation

Provided at the discretion of

the municipal office: Discretionary compensation for the income from the ‘black’ job

Activation programme: If benefit recipient: CELAV(b); Employment Office; Third Sector ONGs

For the housewife:

CELAV(b); Employment Office; Third Sector ONGs

At the discretion of public

authorities: ‘ Accompanying service’ with a ‘Training Stipend’ (€ 400 at maximum)

At the discretion of public

authorities: ‘Accompanying service’ with a ‘Training Stipend’ (€ 400 at maximum)

Other actors that may

provide other types of

support:

For those not entitled to benefits

or who need further help with

housing costs:

Public (County Government for financial help for rent); Non-profit (Caritas; Philanthropic ONGs; Parishes; etc.)

For those not entitled to the

benefit or who need further help

with housing costs:

Public (County Government for financial help for rent); Non-profit (Caritas; Philanthropic ONGs; Parishes; etc.)

Housing:

Public/Non-Profit housing service for lone mothers with minor kids;

For economic support:

Non-profit (Caritas; Philanthropic ONGs; Parishes; etc.)

For further help:

Public (County Government for rent); Non-profit (Caritas; Philanthropic ONGs; Parishes; etc.)

(a) A ‘low’ income is defined as equivalent to 2/3 of average income: € 18.000 per year in 2006. (b)

Centro di Mediazione al Lavoro: Municipal Agency For Labour Mediation.

Table 1. Social assistance in Milan: how some household types would be treated (age of each member in brackets), 2006

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Single man (45), unemployment

benefits expired,

defaulting tenant

Low-income household worker

(36), unemployed housewife

(34), three minor siblings (14, 7,

2), rented apartment (a)

Single mother (19) with a little

child (2), no education, no

saving, no income, thrown out of

her parents’ house

Unemployed boy (19), no

education, no savings, ‘black’

job, defaulting tenant, thrown

out of his parents’ house

Entitlement rules: Statutory right to receive the benefit when needs cannot be satisfied in any other way (e.g. by market earnings). All means including savings and valuable assets need to be exhausted in order to be eligible (but home ownership is allowed).

Amount of the benefit: Combination of centrally-

defined rules and municipal

case-management:

Labour market subsidy (€ 525.63) and other state transfers can be compensated by the living allowance

Combination of centrally-

defined rules and municipal

case-management:

Living allowance as a compensation for income and state transfers

Combination of centrally-defined

rules and municipal case-

management:

Living allowance € 389.37 + € 245,30 (child) + Discretionary supplement; (Labour market subsidy if she accepts to participate at an activation programme)

Combination of centrally-

defined rules and municipal

case-management:

Living allowance € 389.37 + Discretionary supplement; (Labour market subsidy if he accepts to participate at an activation programme)

Activation programme: Employment office

Employment office Employment office,

Employment office

Other actors that may

provide other types of

support:

Public (KELA: housing allowance(b); Municipal Debt Counselling Service; Housing facilities; etc.)

Public (KELA: housing allowance(b); etc.)

Public (Municipal Housing Company)

Public (KELA: housing allowance(b); Municipal Debt Counselling Service; Housing facilities; etc.)

(a) A ‘low’ income is defined as equivalent to 2/3 of average income: € 22.000 per year in 2006. (b).Housing allowance can covers 80% of the reasonable housing costs (up to € 950 in Helsinki).

Table 2. Social assistance in Helsinki: how some household types would be treated (age of each member in brackets), 2007

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Although a national regulation is absent, the municipality of Milan did not define clear rules for the case-management of claimants but, in the last years, cuts in the municipal budget had the effect of forcing social workers to target treatments (and, thus, provide cash benefits) to the most vulnerable clients. By contrast, since the year 1993, Helsinki municipality had to adjust the amount of a basic component of the ‘living allowance’ to a centrally-defined national standard (equivalent to 80% of the flat-rate national pension) even if they maintained the right to decide the amount of a ‘supplementary’ component of the benefit (Julkunen, 1994). All the individuals without reasonable means of subsistence can receive the living allowance, regardless of their marital or family status. Unlike Italy, extended family members cannot thus be considered responsible of an adult child and cohabiting partners (or spouses) are not excluded from the entitlement to the benefit when their partners have an earned income. From the cases illustrated in Table 1, it is evident that the Italian case considerably differs from those of the countries of Continental Europe in which, according to the theorists of the ‘trilemma’ of the service economy, “the availability of social assistance defines the reservation wage below which net wages cannot be reduced” (Scharpf, 2001:278). Conversely, it can be assumed that, in the Italian context, the unavailability of social assistance tends to set a reservation wage at a comparatively lower level than in the countries belonging to the Continental ‘cluster’. This difference has important implications not only for the functioning of the labour market but also for the operation of activation policies. In fact, a lower reservation wage level can be expected to increase the range of employment opportunities for long-term unemployed (and, in particular, for deskilled ones), although at the expenses of the quality of the occupation. It is important to remark that, as seen before, recent labour market reforms also contributed to such an expansion by means of flexibilization of working conditions. In particular, deregulation of temporary employment indirectly facilitated the role of public authorities in promoting employment for vulnerable social groups. In this respect, the increased importance of third sector organizations in the welfare structures at the local level and in the arrangement of activation programmes can be seen as illustrative of these parallel developments on both sides of the labour market. In the municipality of Milan, individuals who do not qualify for the vital minimum are suggested to seek for help from religious and philanthropic organizations (such as Caritas, the social service ‘arm’ of the Catholic Church) from which they may also receive economic support10. What is interesting is that third sector organizations also play a pivotal role in the arrangement of labour market programmes for both the recipients of the ‘vital minimum’ and the individuals who instead are not eligible to the benefit11. As mentioned before, in Italy, the enactment of the new framework law in fact contributed to the institutionalization of the previously-unrecognized role informally played by third sector organizations in the Italian welfare system. With this reform, third sector organizations began to be officially

10 Based on the data obtained from the vignettes, it appears that, in Milan, the only other ‘public’ authority that may be involved is the County Government which allocated some resources in a fund aimed at supporting defaulting tenants. 11 Individuals who searched for economic support but just receive a professional advice (Segretariato

Sociale) from the municipal social workers were 4,138 in 2003 (about 0.3% of the population).

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involved not only in the provision of services but also in the decision-making process through their involvement in the so-called Piani di Zona (‘Zone Plans’), i.e. the collective bodies by means of which social and health services are planned within each administrative district. These institutional instruments also play important functions in the governance of active labour market policies by promoting the inter-institutional coordination of health and social care services as well as the mutual coordination of public and non-public initiatives. Service integration has in fact been the guiding principle of the recent reform which aimed, on the one hand, at reducing pre-existing fragmentation of means and responsibilities and, on the other, at redefining the very content of social service programmes. The need for these changes is implicitly explained by the article of the framework law which defines the entitlement criteria and gives priority to the “individuals who live in condition of poverty or with limited income resources; with a partial or total incapacity to provide for their own needs due to physical or psychological disabilities; who face difficulties in having an active life or entering the labour market; who are subject to decisions of courts and need specific social treatments” (law 328/2000, article 2.3). Hence, in the Italian context, the need for social service integration seemed to have been justified by the narrow identification of a target population of clients with more serious economic and social disadvantages, i.e. by following a self-proclaimed strategy of ‘selective universalism’ clearly inspired by ‘Third Way’ politics and aimed not at alleviating poverty in general but at alleviating the social conditions of the most marginalized and vulnerable sectors of society (cf. Deacon, 2003). These developments marked a further difference with the Finnish context where, instead, the need to target the low-end group of deskilled, long-term unemployed did not bring about an overall redefinition of the aims and the scopes of the social service system but, rather, brought about the consolidation a new, additional tier of ‘integrated’ services. This process of service integration was preceded by the enactment of the Act of Rehabilitative Work

Experience (2001), which introduced a centrally-regulated “last-resort labour policy measure” specifically-designed for young and long-term unemployed in receipt of either social assistance or labour market support or both the benefits (Keskitalo, 2007)12. The fact that the clients of the ‘Rehabilitative Work Experience’ may be in receipt of benefits which are administered by different levels of government encouraged a closer cooperation between the employment office system, the municipalities, the local offices of KELA (the Social Insurance Institution) but also other local branches of the welfare system (such as the health care services). In fact, many of these long-term unemployed were no more easily employable and they were thus exposed to the risk of marginalization not only due to the lack of working skills but also because they also experienced other social problems that needed more intensive and/or multi-professional treatments. Accordingly, from the second half of the 1990s, the prototypes of new ‘Labour Force Service Centres’ (or LAFOs), jointly administered by the municipalities and employment offices, were firstly tested in some municipalities and then, starting from 2004, after the positive evaluation of the experiment, were permanently set up in 38 areas of the country13.

12 Among unemployed in receipt of earning-related unemployment benefits, only those under 25 have to participate to this activation programme when they reach the maximum period of entitlement (500 days). 13 Priority has been given to the municipalities where the number of long-term unemployed who have received the labour market support for at least 500 days is particularly high. In Finland, municipalities with these characteristics are mainly located in the Southern, ‘urban’ areas of the country (information provided by Päivi Haavisto-Vuori, Senior Advisor at the Ministry of Labour of Finland).

20

In that year, a new law also introduced the ‘social enterprises’ (sosiaalinen yritys), new types of market-oriented (i.e. for-profit) firms which differ from standard enterprises because at least 30% of their employees must be represented by long-term unemployed, ageing jobseekers, or persons with impaired capacity for work. The introduction of the social enterprises can be seen as an innovation in the Finnish context, where social economy strategies based on local partnerships have been historically difficult to implement since, as it has been observed, they might call into question some of the normative principles on which the Nordic model of welfare is based, such as the objective of a nationwide homogeneity of treatments and the predominance of public institutions over private initiatives (Kautto and Heikkilä, 2001). Social enterprises can sign agreements with local governments and be involved in the arrangement of measures of labour market integration specifically designed for particularly vulnerable individuals. As a compensation for the reduced work contribution of disabled or long-term unemployed individuals, social enterprises can receive different types of subsidies by the central government, which can cover up to 50% of total labour costs (SYFO, 2006). On the other hand, social enterprises are expected to pay all their employees the wages specified in the collective agreement and, accordingly, they are asked to compete on an equal footing with other profit-oriented companies. In the year 2006, there were about 75 social enterprises in Finland, which employed 371 individuals, of which about 180 with different employment problems (135 were disabled and 44 long-term unemployed)14. As mentioned before, in Italy, third sector organizations contribute in different ways to the governance of social policies at the local level. Firstly, third sector organizations participate, on equal term with public institutions, in the phase of collective formulation of social policy strategies and objectives. Secondly, third sector organizations also participate in the phase of implementation of social policy strategies and, above all, in the provision of social services which are contracted out by municipalities. In particular, social cooperatives (the Italian non-profit ‘equivalent’ of Finnish for-profit social enterprises) are extensively involved in all phases of realization of social inclusion projects for individuals with employability problems15. Social cooperatives can in fact collaborate with local governments in the design of labour market policies for vulnerable individuals and they also participate at the definition of bidding rules and procedures for contracting-out social services. By hiring long-term unemployed jobseekers with disabilities and other barriers to employment, social cooperatives can also bid on public tenders for public services at more favourable conditions than other types of firms. At the same time, social cooperatives benefit from the existence of a large array of flexible contracts (of which some are specifically designed for these non-profit organization) that allow them to provide goods and services at lower costs. All these circumstances seem to explain the reasons why, after a long period of decline, Italy experienced from the early 1990s onwards an “intense and unexpected development” in the number of third sector organizations and their employees (Borzaga, 2004). According to the most recent available data, in the year 2005 there were

14 Data from Ministry of Labour of Finland (www.mol.fi). 15 The reference here is exclusively to ‘Type’ B social cooperatives. Law 381/1991 in fact distinguishes between ‘Type B’ social cooperatives, committed to “the development of several activities - agricultural, industrial, commercial and service provision - for the labour market integration of vulnerable individuals”, and ‘Type A’ social cooperatives, which instead exclusively deal with the “management of social, health and educational services”.

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2.419 social cooperatives in Italy with 54.330 employees (of which 30.141 represented by individuals to vulnerable categories)16. Since 2003, the increase has been of respectively +22.2%, for what concerns the number of social cooperatives, and +28,0%, for what concerns the number of employees.

5. Discussion and conclusions

The comparison developed so far allows an assessment of the degree of convergence between the Finnish and the Italian welfare systems, as a consequence of the introduction of recent reforms. Firstly, for what concerns the ‘technical/mechanical’ innovations related to the changes in the organizational structures of the two welfare states, it appears clear that current trends towards service integration had a completely different meaning in the two countries. In Italy, ‘integration’ can been seen as part of a strategy aimed at enhancing the quality and breadth of coverage of social services without altering the residual logic of interventions. In other words, in the Italian context, social services have been steadily integrated not only in order to (try to) overcome previously-existing fragmentation of political and administrative competences but also in order to more accurately target a specific segment of the population, i.e. the group of very needy individuals who report several forms of deprivations at the same time. In Finland, the attempt to more efficaciously target the interventions on the long-term unemployed with poor qualifications and low employability skills produced a differentiation of activation programmes according to the length of unemployment spells of participants (and to the type of benefit received). Still, in this respect, even the scholars who are more critical of the description of the Nordic welfare systems as ‘universalistic’ see the possibility that the combination of these recent reforms with a stronger commitment to the empowerment of clients may lead, in the future, to the consolidation “an egalitarian approach to activation” (Johansson and Hvinden, 2007a:344). Analogously, social economy strategies took different forms in Finland and Italy, due to the different possibility for local authorities of the two countries to use non-profit organizations as instruments to create low-paid job-opportunities. This difference between the two national contexts is particularly evident when the rather strict conditions to which Finnish social enterprises are subject in order to receive state subsidies are compared with the Italian institutional framework of governance, which instead provides a considerably more important role social cooperatives and which also implies a comparatively higher level of discretion for the latter. Secondly, there is no evidence of any ‘political’ convergence between the two welfare systems which, in fact, still clearly differ considerably with regard to the norms and values of solidarity to which they continue to be committed. The broad institutional differences between the two countries also make a comparative analysis difficult in terms of ‘degrees’ of universalism if, following Esping Andersen, with the latter concept we account for a political strategy aimed at equalizing “the status, benefits, and responsibilities of citizenship” and at helping the labour movement to “build political coalitions” (Esping Andersen, 1990:68). For what concerns the Finnish case in particular, the effects of the loss of entitlement to labour market-related social security programmes on the wealth of a growing number of individuals seemed to be somehow ‘compensated’ by the strengthening 16 Calculations from ISTAT (2008).

22

of the eligibility criteria for last-resort safety net benefits. In some ways, it can be argued that the (partial) retreat from universalist principles had been, at least partly, counterbalanced by the reinforcement of the ‘encompassing’ character of the Finnish social protection system. In the Italian context, welfare state reforms did not seem to succeed to adapt the social protection system to new labour market conditions. In fact, the promotion of labour market flexibility prompted employment growth and reduced the unemployment level but many of the newly-created jobs, not only tend to pay less than the ‘standard’ ones, but they also, often, do not grant entitlements to social security benefits. In sum, it is difficult to see recent Italian reforms as driven by an ‘universalistic’ approach, since the access to the social security system is still far from equalitarian. Therefore, Finnish and Italian reforms need to be seen as embedded in specific ‘socio-structural’ contexts which seem to have ultimately played an important role in determining their reciprocal differences. As seen in the previous pages, the divergence between the trajectories of institutional development of the two welfare systems seems to basically reflect another fundamental divergence, i.e. that between the Finnish and Italian pathways towards a ‘post-industrial’ economy. In Finland, the shift towards a knowledge-based informational society has been accompanied by the steady creation of a “surplus population (which) does not resort to cheap service work in order to survive, but to social and welfare benefits” (Vaattovaara and Kortteinen, 2003:2141-2142). In the last years, activation reforms have thus tried to specifically target this segment of the population, mainly represented by long-term unemployed in receipt of last-resort benefits. Conversely, in Italy, the lingering decline in competitiveness and the subsequent slump in economic growth were followed by a positive job-creation effect which, indeed, masked an increase in labour market segmentation and wage inequalities. So far, somehow paradoxically, the widespread availability of low-paid jobs seemed to create a further incentive for the resilience of the Italian welfare system rather than a more favourable environment for its adaptation to new social risks. This is particularly evident in when the functioning of welfare-to-work programmes is taken into account: only individuals with serious social deprivations are eligible to minimum income provisions, while all the others are expected to rely on family network or to accept low-paid jobs, many of which are created by the same non-profit organizations that participate at the design of activation programmes at the local level.

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