The idea of the welfare state in Europe developed in the context of deep social and economic upheavals caused by industrialization, World War I, and World War II. These conditions created an obvious tension between the working classes and the elites, eventually leading to the need for a social safety net. Notably, the creation of the social security system also served as a kind of "payoff" from social conflicts for the elites. By implementing these measures, the ruling classes sought to prevent class uprisings and unrest that might arise in the face of economic hardship and war losses.

After World War I, many European states faced massive social and economic problems. Huge losses in human lives, ruined economies, and discontent among the masses made the need for social reforms urgent. In response to these challenges, social security programs were introduced to improve living conditions and reduce social tensions.

During and after World War II, when Europe was again devastated, the concept of the welfare state became even more widespread. States began to realize that stability and prosperity depended on social justice and the well-being of citizens. The lower strata of society - peasants and workers - realized that the aristocracy often saved their own lives by sending them to die in large numbers in the two world wars.

It should not be forgotten that the ideas of social justice, as well as the teachings of Karl Marx, were extremely popular in Europe between World War I and World War II. The Soviet Union, which emerged victorious in World War II and took control of much of Eastern Europe, promoted the idea of world revolution for the sake of a complete redistribution of the world.

At the same time, men who had just passed through the bloody meat grinder and knew how to handle weapons, which remained in abundance, returned to peaceful life. Against this background, European leaders realized that to prevent the spread of communism and revolutionary explosion, they must voluntarily adopt a more equitable distribution of benefits.

Gradually, by the 1960s, the welfare state became the norm for most Western European countries. The basic principles of the welfare state include providing social protection for all citizens, which implies not only financial support in times of hardship but also access to quality education and health care. These aspects have become central to the development of a more just society.

A Critique of the General Welfare State

Developed social systems typically offer citizens a wide range of social benefits and guarantees, which genuinely contributes to the improvement of living standards. However, such a system has a downside: the formation of a population segment that prefers not to look for work and instead lives off social benefits. The phenomenon can lead to negative consequences for the economy and social structure of society, as it creates dependence on the working part of the population. According to the World Bank and OECD, social security systems, while beneficial, can inadvertently stimulate unemployment, particularly among young people who exhibit higher voluntary unemployment rates. Some developed countries, such as France and Italy, report elevated rates of voluntary unemployment, where individuals opt out of the labor market to receive benefits. For instance, in 2019, France's overall unemployment rate was approximately 8.5%,[1] yet among young people (15-24 years old), it soared to 20%,[2] with a portion of this group abstaining from job-seeking due to reliance on state benefits.

The Scandinavian Social Model Approach serves as a notable example of this phenomenon. Despite Sweden and Norway's reputation for robust welfare systems, certain studies suggest that the availability of benefits occasionally fosters a 'welfare culture'. In Norway, for example, over 3% of the working-age population received unemployment benefits in 2018. [3] While this figure may not appear high, it nonetheless strains social funds.

Lee Kwan Yew, the founder of modern Singapore, was a prominent critic of the European social model. In his book "One Man's View of the World," he voiced concerns about the sustainability of the European welfare state, arguing that it could undermine economic competitiveness and discourage hard work. He stressed that an overly broad welfare system might demotivate people from working independently and taking initiative. His management model proposed a more individualized approach, emphasizing personal responsibility and self-discipline. Critics of the welfare state also questioned its sustainability, especially during economic crises.[4]They argued that excessive taxes and social spending could impede economic growth.

Gap in Average Income Per Capita in EU Countries

There exists a substantial disparity in average per capita income among European Union countries, stemming from variations in economic development, productivity, gross domestic product (GDP), and other factors. Countries like Luxembourg, Denmark, and Sweden boast the highest income levels, with per capita incomes two to three times greater than those of the least developed EU nations, such as Bulgaria and Romania.

Inequality and unemployment remain important problems in the EU, affecting economic development and social stability. Eurostat data from 2021 reveals that income inequality levels in EU countries ranged from 24% in the Czech Republic to 36% in Latvia,[5] highlighting significant disparities in wealth distribution. These figures underscore the necessity for policies aimed at narrowing the gap between rich and poor.

While the EU's unemployment rate of 6.0% in July 2024 is historically low, [6] notable variations exist among member states. Spain and Greece, for instance, face higher rates at 12%[7] and 12.1%[8]respectively, while Malta boasts the lowest at just 3%.[9] Such disparities emphasize the need for adaptive strategies to address employment issues across different countries.

Youth unemployment continues to pose a significant challenge, with the EU-wide rate at 14.5% in July 2024. [10] However, this figure masks stark regional differences, as evidenced by Spain's alarming 26.8%[11] and Sweden's 24.2%.[12] These statistics highlight the obstacles young people face in securing employment and underscore the importance of targeted government initiatives to create jobs and enhance youth skills.

Although overall unemployment rates in the EU have fallen since peaking during the COVID-19 pandemic, inequality remains at high levels. In search of a new, more effective way of developing the welfare state idea, several EU countries have introduced or are considering guaranteed minimum income systems to reduce poverty and provide social protection. Spain implemented a minimum income system called Ingreso Mínimo Vital (IMV) in 2020, [13] aiming to reduce poverty and help the most vulnerable. Similarly, Italy introduced the "Reddito di Cittadinanza" program in 2019, [14] providing financial support for low-income people and promoting their inclusion in the labor market. Finland has experimented with unconditional basic income, though a permanent system has not been implemented.

Attempts to ensure equal minimum wages and pensions in EU countries have been made at the European Union level, but with limited success. The European Commission once proposed reducing the gap between countries, yet each nation maintains its own tax and pension policies. In 2021, the Commission proposed a minimum wage directive aimed at raising minimum income levels, though its implementation remains dependent on member states' decisions.

Progressive taxation serves as another method for reducing inequality and introducing fairer distribution. Several EU countries have introduced or modified such systems in the last five years: 1) Slovenia adopted new tax measures in 2020, increasing rates for high-income earners. Greece has adjusted its tax system to increase rates for the wealthy, especially after supporting the economy during the crisis. 2) In Spain, local governments have increased taxes on high-income citizens to address pandemic effects.

Despite these efforts, Spain, Italy, Lithuania, and Latvia remain the countries with the highest level of societal stratification (Gini index). Greece has also experienced difficult economic conditions in recent years due to the debt crisis, significantly increasing the gap between rich and poor.

In 2017, the World Bank urged Latvia to consider introducing a progressive income tax to address growing social inequality. [15] Responding to these recommendations, Latvian authorities implemented a new tax system in 2018, resulting in an increased tax burden on higher incomes and lower taxes for low-wage earners.

Following the introduction of progressive taxation, Latvia began showing positive changes in social equity. The Gini coefficient - an indicator of inequality - decreased from 35.7% in 2021 to a record low of 34.0% in December 2023. [16] Introducing progressive taxation proved to be an important step towards reducing social inequality and improving Latvia's economic situation.

The Newest Challenges

Social policy in Europe underwent major changes during the COVID-19 pandemic. Countries faced competition for vaccines due to limited resources, exacerbating existing problems of equitable distribution. The economic turmoil and increasing number of people falling ill, especially among marginalized groups, demonstrated deficiencies in socialization projects and resource allocation. The situation sharpened the debate about who deserves government support and what measures should protect vulnerable groups.

After the COVID-19 pandemic, the European Union (EU) economy began to gradually recover, though the pace varied across member countries and their economic structures. EU member states introduced a range of support measures for businesses and households, including direct payments, subsidies, and tax relief programs. The European Union also launched an extensive recovery fund, known as Next Generation EU, focused on sustaining and stimulating economic growth.

Despite positive performance, economic growth in the EU remains uneven. Some countries, such as Ireland and Latvia, are experiencing strong growth, while others, like Sweden, face economic difficulties. These disparities create contrasting perceptions of the situation across different parts of Europe.

The EU economy, while recovering from the pandemic, faced new challenges resulting from the conflict in Ukraine. The war triggered mass migration of Ukrainians to EU countries, creating both challenges and opportunities for the economy. These included the need to provide humanitarian assistance and resources for refugee integration. Long-term prospects will depend on countries' ability to adapt to the new reality, including energy security and the resilience of economic systems.

The war in Ukraine, which erupted in February 2022, triggered a sharp spike in energy prices, immediately impacting the welfare of the most vulnerable citizens. By summer 2022, gas prices had soared to over €300 per MWh, [17] with wholesale rates increasing up to 15 times compared to early 2021 levels. Consequently, households and businesses faced staggering energy bills. August 2022 saw household gas costs rise by 41%[18] and electricity by 34%.[19] Although gas and heating prices in Europe have since begun to decline, they remain above pre-crisis levels. In 2023, gas prices have retreated to near-2021 levels. Nevertheless, energy market uncertainty persists, compelling governments to implement measures to stabilize the situation and safeguard consumers.

The Ukrainian migration crisis stands as one prominent example among several migration crises in the early 21st century that have significantly impacted social tensions across European countries. Millions of refugees and migrants, fleeing their homelands in search of safety and improved living conditions, have created strain in labor markets and fueled a rise in xenophobia and nationalism.

Economic migrants tend to gravitate towards countries with well-developed social protection systems. OECD research[20] indicates that migration patterns flow from nations with minimal social safeguards to more advanced countries offering higher levels of support. Within Europe, substantial migration is observed towards countries like Germany and Sweden, renowned for their world-class social protection systems.

This backdrop has contributed to the growing popularity of right-wing parties advocating for stricter migration policies and "protection of indigenous interests". Their political rhetoric often centers on the concept of a welfare state serving exclusively "its own", implying restrictions on social benefits for migrants and refugees.

The migration situation in the EU has become one of the main factors affecting the perception of welfare among citizens. Growing dissatisfaction with migrants and their access to social services has led to an increase in the popularity of right-wing parties. These parties actively use the population's fears to promote their agenda, which inevitably affects welfare state policies.

Migration has always been an important factor influencing EU social policy. During the First and Second World Wars, Europe itself experienced a migration crisis, with millions of citizens fleeing war, oppression and brutal regimes - be it the Soviet Union in Eastern Europe or dictatorships in Spain and Portugal. Despite these difficulties, the social model the EU was building embraced all inhabitants, providing protection and support to those who needed it most.

However, in the first decade of the 21st century, we witnessed a new migration crisis directed from outside the EU. The crisis has not only challenged existing social models, but has also contributed to the rise in popularity of right-wing radicals across Europe. Once in power, these forces could significantly change the vision and approach to building a welfare state. Such changes could have major implications for EU social policy, including the redistribution of resources and a shift in the principles of migrant integration. Their ideas about closing borders and exceptionalism could substantially alter the vision of social policy and the approach to constructing a welfare state.

Populist radical right-wing parties are constructing a dual model of the welfare state. [21] They criticize and exclude groups they deem "undeserving," such as migrants, the unemployed without proper seniority, or young people reliant on welfare benefits. These parties often employ rhetoric arguing that public resources should be reserved for "real" citizens, while portraying the "undeserving" as threats or burdens to the economy and social stability.

This approach creates a polarized public discourse, dividing society into those with access to social services and those excluded. Consequently, social tensions increase, and negative stereotypes of certain groups proliferate. As these parties gain political influence, the principles of universal social security may be further eroded, jeopardizing social justice and solidarity within society.

The situation underscores the necessity to reevaluate existing social policies and discuss methods for creating an inclusive system that considers the common interest, rather than just the interests of specific groups. In light of contemporary challenges such as globalization, economic instability, and migration, finding a balance to ensure social security for all becomes crucial. The influence of populist radical-right parties extends beyond their direct impact on public policy. Mainstream right-wing and left-wing parties are beginning to adopt elements of their distributive agenda, particularly the notion of prioritizing citizens' access to social goods. 

Left-wing parties across Europe, facing pressure from growing right-wing sentiments, have begun adapting their agendas by adopting tougher positions on migration policy. Germany serves as a prime example of this shift. During the 2024 elections, the ruling coalition government encountered fierce competition from right-wing parties like the Alternative for Germany (AfD), which successfully capitalized on citizens' discontent over migration policy and social security issues. Consequently, parties such as the Social Democratic Party of Germany (SPD) started reconsidering their approaches, placing greater emphasis on controlling migration and tightening related legislation. These developments clearly demonstrate the evolving nature of political discourse in the country.

Current Trends and Equitable Distribution

Today, there is a heterogeneous approach to public welfare policies in Europe. According to Eurostat data, income inequality varies across the EU, with the highest levels in countries such as Latvia and Lithuania and more balanced systems as in the Nordic countries. In recent decades, many European states have taken measures to equalize living standards and income distribution. This includes tax reforms, social assistance and protection programs, job creation, especially in the high-tech and green economy.

Against the backdrop of rising inequalities, the European Commission continues to emphasize the importance of investing in education, health and social services as an important part of a strategy to ensure a fair distribution of benefits. Today, the concept of well-being is adapting to new challenges such as population ageing, migration and climate change, which creates the need for constant review and modernization of existing systems.

The Welfare State in Europe is on the Cusp of Significant Change

One of the key steps in realizing the welfare state idea was the new EU minimum wage directive adopted in 2023. This directive aims to establish adequate minimum wage levels across EU member states, considering each country's cost of living and economic conditions. For instance, the minimum monthly wage varies significantly: €2,570 in Luxembourg, [22] €2,151 in Germany,[23] and €700 in Latvia.[24]

The European Social Charter, revised in 1996,[25] continues to play a crucial role in protecting citizens' social and economic rights. It guarantees the right to housing, health care, education, and fair working conditions. The Charter ensures access to free, quality education, protection against unemployment, and support for families with children. Additionally, it includes measures to safeguard the rights of persons with disabilities, the elderly, and the homeless.

European countries are also addressing gender inequality in the workplace. In 2023, the Pay Transparency Directive came into force,[26] requiring employers to disclose salary levels or ranges before job interviews, aiming to reduce the gender pay gap. Despite economic and political challenges, Europe maintains its commitment to welfare state principles. Wage regulation, social guarantees, and measures to combat inequality demonstrate European countries' aspirations for social justice and sustainable development. Moving forward, it's crucial that these efforts continue and adapt to changing conditions, ensuring a decent life for all citizens.

The future of Europe's welfare state hinges on various factors, including political trends and economic conditions. Right-wing parties' growing popularity and unsuccessful attempts to reduce inequality could trigger significant changes in the welfare system. Many European countries continue to grapple with serious social and economic disparities, despite efforts to narrow the gaps. Persistent inequalities in income and access to quality health and education services remain a pressing concern. Failure to address these issues may lead to increased public discontent, potentially strengthening right-wing parties. Such developments could result in transformations like cuts in social spending, stricter eligibility criteria for benefits, and a heightened focus on employment.

[4] The Case for a Targeted Criticism of the Welfare State, CATO Institute, 2018, https://www.cato.org/cato-journal/winter-2018/case-targeted-criticism-welfare-state

[12] Continued weaker labour market situation, Statistics Sweden, 2024, https://www.scb.se/en/finding-statistics/statistics-by-subject-area/labour-market/labour-force-surveys/labour-force-surveys-lfs/pong/statistical-news/labour-force-surveys-lfs-april-2024/

[13] Minimum Vital Income / Child Aid Supplement (CAPI), The Ministry of Inclusion, Social Security and Migration, https://www.inclusion.gob.es/en/web/inclusion/ingreso-minimo-vital

[14] Citizens’ Income and Citizens’ Pension, INPS, https://www.inps.it/it/en/dettaglio-scheda.en.schede-servizio-strumento.schede-servizi.reddito-di-cittadinanza-e-pensione-di-cittadinanza-53209.reddito-di-cittadinanza-e-pensione-di-cittadinanza.html

[15] Latvia Needs Improved Tax System to Deliver Better Services to Its Citizens, World Bank, 2017, https://www.worldbank.org/en/news/press-release/2017/04/13/latvia-needs-improved-tax-system-to-deliver-better-services-to-its-citizens-says-world-bank

[16] Latvia - Gini coefficient of equivalised disposable income, Trading Economics, https://tradingeconomics.com/latvia/gini-coefficient-of-equivalised-disposable-income-eurostat-data.html

[17] A market mechanism to limit excessive gas price spikes, European Council, https://www.consilium.europa.eu/en/infographics/a-market-mechanism-to-limit-excessive-gas-price-spikes/

[18] Natural gas price statistics, Eurostat, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Natural_gas_price_statistics

[19] Electricity & gas hit record prices in 2022, Eurostat, https://ec.europa.eu/eurostat/web/products-eurostat-news/w/DDN-20230426-2

[20] International Migration Outlook 2023, OECD, https://www.oecd.org/en/publications/international-migration-outlook-2023_b0f40584-en.html

[21] The populist-radical-right impact on the welfare state, Juliana Chueri, Social Europe, 2023, https://www.socialeurope.eu/the-populist-radical-right-impact-on-the-welfare-state

[22] The national minimum wage in Luxembourg remained fixed, Countryeconomy, https://countryeconomy.com/national-minimum-wage/luxembourg?year=2024

[23] Germany: Minimum wage to increase to €12.41 in 2024, DW, 2023, https://www.dw.com/en/germany-minimum-wage-to-increase-to-1241-in-2024/a-66030989

[24] Minimum monthly wage, Ministry of Welfare of the Republic of Latvia, https://www.lm.gov.lv/en/minimum-monthly-wage

[25] The Revised European Social Charter, Council of Europe, https://www.coe.int/en/web/european-social-charter/the-revised-european-social-charter

[26] Directive (EU) 2023/970 of the European Parliament, EUR-Lex, https://eur-lex.europa.eu/legal-content/EN/TXT/?toc=OJ%3AL%3A2023%3A132%3ATOC&uri=uriserv%3AOJ.L_.2023.132.01.0021.01.ENG