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7 New Social Rights in France and Germany A s we have seen, the past two decades have witnessed a series of important adjustments in French and German social and labor-market policy. Successive governments have reformed the two countries’ pension and health-care systems, working to preserve the core of their welfare states while reconciling benefits with strained economic circumstances. Benefits have been trimmed; eligibility rules have been tightened; and dysfunctional arrangements, such as the traditional reliance on early retirement, have been scaled back, all with a view to reducing unemployment and aligning expenditures with social contributions. In labor-market policy, the degree of change has been no less significant, as authorities have extended job-search requirements for unemployment insurance, liberalized regulations, introduced financial incentives for employers to create jobs, and worked to boost employment directly through a variety of new policy instruments. Reforms in these two major areas of social protection constitute co-equal parts of a broader reform strategy of “managed austerity,” entailing the promotion of workers’ access to income through employment , addressing the vicious circle between unemployment and Bismarckian social policies, and shoring up benefits designed to limit social and economic exclusion. While hardly neoliberal, these trajectories of reform have led to concerns about increasing economic precariousness for vulnerable groups of workers. As social-insurance benefits have been scaled back and pressures on workers to find jobs have intensified, authorities have cast about for alternative ways to support low-income workers and ensure social peace. As during the 1980s and New Social Rights in France and Germany 145 early 1990s, when the abandonment of French dirigisme and German reunification created demands for welfare-state expansion, since the early 1990s French and German governments have devised new ways to limit economic vulnerability . As opposed to the United States and Britain, in both countries neoliberalism is a marginal political discourse. Consequently, governments have had to temper claims of the necessity of reform with an emphasis on the state’s continuing social and economic responsibilities. The emphasis on these responsibilities has been strengthened by the recent chaos in international financial markets and the global economic downturn. One obvious possible response involves expanding means-tested policies of income support. These programs have the advantage of being financed through direct taxation rather than social contributions, and they therefore do not create the same kinds of labor-market pressures that contribute to unemployment and undermine welfare financing. Furthermore, because they are means-tested rather than wage-related, such income-support policies are unlikely to lead to the exploding costs and wage spirals to which payroll-tax-based benefits are subject. Such policies also enjoy a number of political advantages. First, welfarestate expansion is unlikely to produce the kinds of recrimination and social conflicts that derive from retrenchment, even if the tax increases that tend to accompany it may do so in certain contexts. Second, the meager benefits create limited disincentives to work and are therefore relatively immune to demands for cuts. Although French and German authorities have shared incentives to turn to policies of income support, policymaking in this area has differed in the two countries, shaped by distinct institutional arrangements. In France, where these policies are the province of the central state, authorities have been able to expand them unfettered by competing centers of political power. Beginning in the early 1980s, French elites embarked on a period of significant expansion of antipoverty benefits, thereby plugging gaps in the coverage provided by their employment-based, Bismarckian welfare state. Although the expansion of these benefits tended to be undertaken by the left, once in place they have remained relatively uncontested by either governments of the right or employers. As French authorities have introduced a wide variety of reforms in social insurance and labor-market policies, they have also, by degrees, created an extensive social safety net that protects workers from the worst extremes of poverty and economic vulnerability. In Germany, by contrast, the story has been more mixed and the expansion of antipoverty benefits more constrained. Unlike the case in France, where devising, implementing, and funding these benefits are the tasks of the central state, in Germany they generally lie within the administrative purview of the Länder and municipalities. The principal German antipoverty program, Sozialhilfe (social assistance), created in 1961, provides for both cost-of-living assistance 146 Chapter 7 and aid to those in “special circumstances” (such as physical disability). It represented a significant extension and consolidation of earlier income policies...

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