The European Social Model: a competitive advantage

Investing in social care and the well-being of citizens is the European way, giving us a competitive advantage. Let’s use it to widen the gap, writes Miapetra Kumpula-Natri.
credit: Adobe Stock

The EU can foster economic growth by promoting digitisation and the well-being of citizens. In this ‘economy of well-being’, the EU can maintain its competitiveness thanks to a highly-skilled and healthy workforce, strong social and economic security and minimal inequalities.

This is vital, as economic growth in the EU appears to be stuck at low levels and Europe risks following Japan into a prolonged period of low growth.

In the digital economy, a key source of growth in future decades, the EU also risks falling behind the US and China. To overcome these challenges, the EU should build on its existing competitive advantage over the US, China and others; the European Social Model.


RELATED CONTENT


Research by the OECD has shown that the economy of well-being works; investing efficiently in better health, education, employment, gender equality and social protection can contribute significantly to economic growth in Europe.

Good health is the basis of well-being, while also driving productivity and individual earnings. Mental health problems alone cost the EU28 an estimated four percent of GDP.

There is a great deal of scope for increasing the level of education, which has a clear link to prosperity. Each additional year of schooling increases GDP per capita by around 12 percent.

“The EU should build on its existing competitive advantage over the US, China and others; the European Social Model”

At the same time, Europe needs to make a swift shift towards a new future. As Commission President Ursula von der Leyen has clearly stated, we need a Europe fit for the digital age.

Social protection and highly-progressive tax systems are needed to foster economic security and reduce inequalities.

Recent OECD research has concluded that greater inequality leads to lower economic growth.

Additionally, gender equality leads to higher employment rates, which are directly linked to economic growth. Improving gender equality could increase total EU GDP by up to 19 percent by 2050.

The importance of social investments in boosting growth and creating ‘an economy of well-being’ were highlighted in the conclusions of the Employment, Social Policy, Health and Consumer Affairs Council in October 2019, at the initiative of the Finnish EU presidency.

There is clear potential for social investments to become a shared ambitious policy focus of EU institutions. Social investments can be increased by setting new minimum social requirements in EU Directives.

“Investing efficiently in better health, education, employment, gender equality and social protection can contribute significantly to economic growth in Europe”

It is welcome that the new Commission has, for example, promised a new Directive on minimum wages. Member States’ social investments can also be increased by focusing on ways to increase their social performance in the Economic Semester, alongside economic and environmental measures.

Until now, social reforms have been considered as somewhat separate from economic reforms. The goal should be to integrate social reforms into Member States’ growth strategies while seeking upwards social convergence between Member States. Similarly, investments via the EIB and other European instruments should focus on projects with economic, environment and social returns.

For example, investing in energy efficiency for social housing can simultaneously drive down emissions, decrease energy expenditure and increase the disposable incomes of low- and middle-income households.

To get the most from social investments, Europe needs clear progress on digitisation, AI and the data economy. It must dispel myths surrounding AI and engage with these innovations in a pragmatic way.

Used properly, AI can be a tool to increase efficiency across sectors while driving the well-being of citizens. Healthcare is a key sector where AI can bring economic benefits and increase citizens’ well-being. Europe’s population is ageing; we need to find ways to use our scarce resources more effectively.

Deployed correctly, new data solutions and AI will help us detect and prevent health-related societal challenges. AI has already been used successfully, for example, in analysing how social services are used and identifying those that have not been efficiently used by citizens.

Such information can greatly contribute to developing better public services and better public sector jobs.

Last spring, Finland passed a law enabling secondary use of non-personalised health and social data. The Act aims to facilitate the effective and safe processing and access to personal data for enhanced research, statistics and development in the health and social sector.

The EU should pass a similar law with the aim of combining public datasets of Member States. Other measures are also needed to overcome the current Balkanisation of data along national lines.

We can realise the economic and social benefits of the digital economy by making personal, business and public data to fl ow freely within Europe.

With the help of increased social investments, digitisation, data and AI, the EU can simultaneously increase prosperity and well-being in Europe. Let’s not miss that opportunity.

Read the most recent articles written by Miapetra Kumpula-Natri - EU must ensure everyone benefits from energy efficient buildings

Share this page