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Strengthening the Welfare State
by Josef Woss and Niema Movassat
Monday Jan 11th, 2021 3:02 AM
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Welfare state 2021 - Using lessons from the crises to strengthen it
by Josef Wöss
[This article published on Jan 4, 2021 is translated from the German on the Internet,]

2021 will also be strongly influenced by Corona - and this also affects the welfare state. Its spread must be stopped and its massive impact on people and damage to the economy and employment must be eliminated as far as possible. In addition to the healthcare system, the labor market and social investments must be the focus of social policy. It is very important that the right course is also set in the longer term and that major challenges such as greater distributive justice, digitization, climate protection and demographic change are addressed. The welfare state has essentially passed the test well. The task now is to use the crisis management to further develop it in a positive way.

Healthcare system: Improve working conditions, strengthen prevention

Corona made it drastically clear how fundamentally important the healthcare system is and how dangerous the dominance of purely (business) economic criteria in key social areas is. Ultimately, in all countries of the European Union, everything else had to be subordinated to containing the virus and dealing with its consequences.

Fortunately, Austria has a strong health care system. After the Corona experience, it is hoped that the importance of this is also clear to those who in the past have repeatedly called for savings - by reducing acute beds, staffing levels in hospitals, etc.

In addition to the necessary coverage of the corona-related additional costs from relief fund resources, it is now important that the weak points that have become apparent as a result of the crisis are eliminated. These range from staff shortages and often poor working conditions to deficiencies in crisis resilience and inadequate overall management of the system.

It is to be hoped that Corona will also be recognized as a general wake-up call for more disease prevention. The dimensions involved are shown, for example, by the costs of work-related accidents and illnesses. According to Wifo, this results in annual costs of 900 million euros in the healthcare system alone. In terms of society as a whole (including loss of productivity, immaterial damage, etc.), the figure is almost 10 billion euros per year!

Employment - Dramatic slump requires show of force to counteract it

Never before in the last decades has there been a slump in the labor market comparable to the one in 2020. 1.3 million employees were on short-time work at the peak, while currently 320,000 are still almost 10% of all employees. It is also foreseeable that short-time work will remain indispensable well into the coming year. Particularly badly affected by the crisis are those who have lost their entire income (such as a great many "new self-employed") or their jobs and have now fallen back on the - far too low - wage replacement benefits from unemployment insurance or were already unemployed before the crisis and have hardly any chance of getting back to work quickly.

As of November 2020, the number of unemployed (including training participants) has risen by 90,000 year-on-year to 460,000. How dramatic the unemployment problem has become becomes even clearer if one looks back a little further: In Nov 2007 (as before the last major crisis), the number of unemployed was still 280,000. It is fairly certain that the current development will now also drive up the number of long-term unemployed quite massively.

It is clear that a rapid recovery from this slump cannot be achieved with conventional labor market policy instruments. What is needed is a national (and also EU-wide) effort to counteract this trend at several levels, building on extensive public investment programs such as those set out in the EU Recovery Fund.

Unemployment: More opportunities and better protection

Labor market policy in the narrower sense is also called for. At its core, it needs a qualification and retraining offensive geared to immediate labor needs, e.g. in the area of care, and to the requirements of digital and ecological change. This can reduce the labor supply for the period of very high unemployment and at the same time make a very important contribution to successfully managing structural change. The Corona Labor Foundation envisaged by the government is a step in the right direction, but it first needs to get up and running, be more precise in terms of its content and ultimately be set up on a much broader basis. Part of the training offensive must also be that significantly more funds are made available for inter-company apprenticeships.

Another instrument for easing the burden on the labor market while at the same time covering existing needs is the creation of subsidized jobs for the long-term unemployed in public services in the social, ecological or cultural fields, as proposed in the AK model "Chance 45". This could create a very meaningful employment opportunity for up to 40,000 long-term unemployed persons aged 45 and older, e.g. in municipalities with the involvement of the local population in the needs assessment.

Moreover, the chances of finding work again quickly, which are minimal at best for very many unemployed people, make it clearer than ever that 55% compensation from net wages in the event of job loss is far too low. With net earnings of, for example, 1,500 euros per month, this means a wage replacement benefit of just 825 euros, which is 35% below the officially recognized poverty risk threshold! The increase to 70% demanded by the ÖGB and AK would remedy the situation and would also have the advantage for the economy that unemployment insurance would be able to fulfill its function as an "automatic stabilizer" in times of crisis to a much greater extent than before - in other words, purchasing power and thus economic demand would be secured.

Another drastic crisis experience is the lack of a counterpart to unemployment insurance for the self-employed for new - and often precarious - forms of "self-employment" in the event of the loss of work assignments. On this point, too, further development of the welfare state is called for.

Young people and women: Special support needed

People who were already structurally disadvantaged before the crisis are generally hit hardest by Corona. For example, many people with low qualifications, limited working capacity or disabilities are currently finding it even more difficult than before to find a new job or keep their current one. Dramatically affected are also many young people who do not manage the planned entry into working life due to corona and now have to compete with the coming cohorts for far too few training and jobs. In addition, they are not even entitled to unemployment benefits due to a lack of insurance periods. This is a particular challenge for labor market policy.

Many women have also been severely affected by the crisis. Decades of efforts to achieve greater gender equality have suffered a massive setback in the Corona Year. For example, the shift of gainful employment to the home office has led to many women's multiple workloads being increased even further. A countermeasure is urgently needed. Better opportunities for mothers (and children) would come above all from an investment offensive in childcare facilities. An international comparison of spending on elementary education alone shows that there is a considerable need to catch up: Austria's spending of 0.65% of GDP is far below the OECD average of 0.93%.

It is also very important that the all-round praise of the mostly female "high performers" in health and care professions, in retail, etc. is reflected in concrete improvements for these occupational groups. In this context, it is also difficult to hope that the unspeakable - but widespread - restriction of the classification as "high achievers" to high earners will finally come to an end with the Corona Year 2020.

Legal protection for home office, redistribution of working time

It is foreseeable that the forced shift of many (employee) activities to the home office will have a lasting effect beyond the Corona period. In the future, working from home will be much more prevalent in working life than it was before the crisis. For employees, this brings both opportunities and risks. What is needed in any case is a framework law in which, for example, the principle of voluntariness, principles for bearing costs and co-determination rights of employee representatives are anchored. Specific legal protections are also needed for other new forms of work, such as platform work. In all these cases, care must also be taken to ensure that new forms of dependent work are classified as such and that those affected are not forced into (pseudo)self-employment - and thus out of the protection of labor law and collective agreements.

New momentum should be given to the debate on a fairer distribution of both paid and unpaid work. Against the backdrop of the massive slump in employment and the considerable danger of persistently high unemployment rates, it should also finally be possible to initiate a broad public discourse on the opportunities and risks of a reduction in working hours. Taking a cue from economically strong countries such as Sweden and Denmark, with their significantly shorter working hours, could point the way here.

Pensions an important stabilizer in the crisis

The COVID crisis has also had a considerable impact on the pension system. As a result of the slump in employment, contribution income from earned income will remain well below the "normal" trend for years to come. On the expenditure side - as has been anticipated for years - costs are expected to rise more sharply, above all because the baby boomers will reach retirement age in the next few years, resulting in a considerable increase in the number of pensions.

One of the great strengths of our statutory pension system is that the slump in contribution income caused by the crisis has not affected the level of pensions; this not only safeguards the incomes of the elderly but also secures consumer demand from pension income, which is very important for the economy.

Statutory pension insurance thus fulfills its very important function as an "automatic stabilizer" for containing the consequences of the crisis. The unavoidable consequence, however, is a significant increase in the required federal funds. Nevertheless, they will remain within limits (fluctuation range of around 3% of GDP), not least because adjustments to demographic change (elimination of various early retirement options, extension of the assessment period, etc.) have already been made and the level is much lower than previously forecast.

Good benefit level - also for the younger generation

It is foreseeable that neoliberal critics of the statutory pension system will nevertheless use the crisis-induced increase in federal funding for their repeated calls for a "major pension reform." It is also foreseeable that they will again call for an adjustment to demographic change and, in addition, try to play off today's younger people against the older ones - with the claim that they will have to pay high contributions later but will only receive very low benefits.

The fact that the pension system has long since been adapted to aging and to the expected further increase in life expectancy by means of major reforms is being ignored. It also ignores the fact that the pension prospects of today's younger people are much better than claimed. The "pension account law" with 1.78% benefit credit from annual income - and deductions or supplements for retirement before or after 65 - also offers today's young professionals a good income replacement.

And the repeatedly claimed "explosion of pension costs" will not occur. In terms of intergenerational fairness, however, it is essential that the expected increase in the share of the population in the 65+ age group from around 20% at present to 30% in the future means that a somewhat higher share of GDP will have to be spent on pensions for today's younger generation.

If you want to secure pensions, you have to start with the labor market

To secure the pensions of today's younger generation, there is no need for further "major pension reforms," but rather a focus on the labor market, and not only at higher working ages. Contrary to what is often suggested, the important relationship between contribution income and pension expenditure is not only determined by demographics, but also to a large extent by the extent and quality of the employment of people of working age.

And, as is well known, individual pension levels - both today and in the future - are also largely determined by how good (or bad) the employment history is from entry into working life. More gender equity not only in the pension system, but also in the labor market is urgently needed for this reason (the gender pension gap is currently over 40%!).

Distributive justice as a key issue in financing the costs of the crisis

It is clear that the immediate costs of the crisis and the necessary investments in the future will lead to a substantial increase in public debt for years to come. There is no serious alternative to dealing with a crisis of this dimension. The costs of inaction would be much higher in the medium to long term. Misconceived "budget discipline" in times like these would have disastrous consequences for entire population groups, for the economy and generally for our future prospects. On the positive side, this has also been recognized at the EU level and considerably large support and investment programs have been initiated.

Sooner or later, however, it will of course also be necessary to clarify who will have to bear the costs of the crisis. Distribution issues will thus move to center stage. Here, too, the same must apply: Crisis management must set the course in the right direction. The divergence between rich and poor that has been observed for a long time must be stopped and reversed. This requires, on the one hand, more tax justice both nationally (appropriate financing contributions from large inheritances and assets, etc.) and at the EU level (prevention of tax dumping; closing tax loopholes for 'global players'; etc.) and, on the other hand, the protection of small and medium incomes and the welfare state.

Whether the most severe economic slump in decades will lead to a lasting significant reduction in prosperity and even more inequality or can at least be quickly overcome at the national and European level and ultimately result in a fairer, more stable and more livable reality for as many as possible depends to a large extent on whether policymakers set the right social and economic policy course today.

Undefined and in parts absurd

by Niema Movassat*

[This article published in Jan 2021 is translated from the German on the Internet,]

The novel corona virus was the reason for a new infection protection law, which was passed in the Bundestag on November 18 with the votes of CDU/CSU, SPD and the Greens.

No, it is not a new "enabling law", as Corona deniers believe. However, criticism of the law and the way Corona measures are decided is in order.

Let's start with the "easy" one: the melange of Corona deniers, right-wing extremists and conspiracy theorists who demonstrated around the Reichstag building on the said November 18, claiming that the new Infection Protection Act is an "Enabling Act" - an analogy to 1933. How absurd the comparison is can be seen from the fact that the Corona deniers are allowed to blithely continue demonstrating and that Parliament has not been dissolved.

Incidentally, laws under public law always contain "authorizations" for the executive, so-called "enabling bases." This follows the principle of "no encroachment on fundamental rights without a law", i.e. it is an instrument of the rule of law. In general, the question of "encroachments on fundamental rights" is less about the "encroachment" itself - road traffic regulations are also "encroachments on fundamental rights" - but the relevant question is always one of proportionality.

Why the law was changed

Let us turn to the factual criticism of the new Infection Protection Act and thus to the preliminary question of why a new Infection Protection Act became necessary. A few days before the amendment of the Infection Protection Act, the Bavarian Administrative Court had voiced considerable criticism of the current Corona policy: Since the Corona measures would interfere very deeply with fundamental rights, a clear legal basis was needed, it said.

The background is that the measures are based on ordinances issued by the federal states. However, Article 80(1) of the Basic Law requires that ordinances have a clear legal basis. However, Section 28(1) of the Infection Protection Act, the substantive basis for the ordinances, only contained a general rule that the necessary measures could be enacted. This was clearly not sufficient and was too vague.

The new Infection Protection Act

The "Third Law for the Protection of the Population in the Event of an Epidemic Situation of National Significance" presented by the coalition was intended to create the clear legal basis needed. A supportable motivation, as governmental measures against the spread of the coronavirus are necessary. Therefore, a new §28a was introduced into the Infection Protection Act, which regulates which measures the states are allowed to impose. Contact restrictions, distance bans, mandatory masks, the closure of stores and much more are mentioned. Paragraph 2 of §28a sets a higher hurdle for some measures, such as bans on meetings and religious services; they may only be imposed when other measures have failed to contain the spread of COVID-19.

For the question of when and how drastic measures can be taken, paragraph 3 refers solely to the number of new infections per 100000 population being exceeded. Paragraph 5 introduces a justification requirement for state ordinances and a time limit of four weeks.

Criticism of the amendments

On 12/11/2020, an expert hearing was held in the Health Committee. It was disastrous for the coalition. While some of the experts' criticisms were addressed, others were not. Some of the criticisms are briefly presented here:

First, there was the criticism of the procedure. The coalition had eight months to present a sensible amendment to the Infection Protection Act. Instead, it whipped the "Population Protection Act" through the Bundestag within a week. This is no "trifle," for this procedure was grist to the mill of the Corona deniers, who use this huff-and-puff procedure as further evidence of a "conspiracy." This unnecessary haste has done serious damage to democracy.

As for substantive criticism, many provisions in the new law are vague. For example, it is not clear what exit restrictions are. Jena law professor Klafki put it succinctly: "On an unbiased reading, one might think that the legislature wanted to empower the relevant authorities to ban people from going into their own backyards." The requirements for issuing measures are also unclear because the terms mentioned in §28a para.2, such as "serious protective measures", "severely restrictive protective measures" and "simple protective measures" are not defined anywhere. With regard to curfew restrictions, it has been included that time-bound curfews are possible. This means that the legislator can now regulate that people are not allowed to leave their homes at night. This is an absurd regulation, as it does nothing to protect against infection and is therefore unconstitutional.

Another point of criticism is that the legislator must justify the regulation when it is first issued. If it extends it, however, it does not have to justify this. The blanket reference to thresholds (new infections per 100,000 inhabitants) is rigid and does not define a health threshold, but an administrative one: how far can the state track new infections? Instead, a conceivable approach would be to significantly strengthen public health departments so that they can track contacts even when infection numbers are higher.

What would a new regulation have to look like?

First, each individual measure would have to be standardized, along with the requirements and limits of the encroachment on fundamental rights. Such a set of rules is common in police law, and ultimately infection control law is nothing other than special police law. On the one hand, such a standardization would ensure transparency, and the legislature would have to give serious thought to which measure should be possible when and how.

Secondly, compensation rules for those affected, whose stores and restaurants are closed, must be included in infection protection law. So far, there are only "goodwill" rules from the federal government.

Third, state parliaments must insist that approval by the state legislature be required for any state regulation.

Fourth - and this is a fundamental criticism - it cannot continue in this way that the state premiers and the chancellor agree on the measures in the back room. This non-transparent procedure is unworthy of a democracy. At the very least, the federal government could start by informing the Bundestag of its goals and positions before the rounds of talks, thus putting them up for public debate.

In essence, politics in the Corona crisis must explain its measures better, weigh the individual measures more carefully, avoid absurd rules as far as possible and help those affected more. This is the only way to win the trust of the population for the necessary measures.

*The author is constitutional policy spokesman for the DIE LINKE party.

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