The mere mention of the welfare state is enough to send shivers down the spine of conservative politicians. They argue that state benefits to the underprivileged in society encourages a sense of dependence and entitlement and stops deprived individuals from being productive community members.
After decades of levelling up sectors of society, the last two decades of the 20th century saw politicians dismantling layers of benefits in free health, education and retirement benefits. Neo-liberalism promoted the concept of less state involvement in society’s economic and social fabric.
Yet, it is inconceivable to believe that a social pact between the different sections of society can be scrapped and replaced by free-for-all individualism to enhance social mobility.
Minouche Shafikis is the director of the London School of Economics and Political Science. In her much-acclaimed book What We Owe Each Other: A New Social Contract, she argues: “Everyone participates in the social contract every day, and we rarely stop to think about it. Yet social contacts shape every aspect of our lives, including how we raise our children and engage in education, what we expect from our employers and how we experience sickness and old age.
COVID has revealed how the current social pact has hit most severely the vulnerable – the old, the sick, women, and those in precarious jobs. It has exacerbated existing inequalities. Some often wonder why so many ordinary people are disengaging from the political democratic process. The underlying causes include the anger of many, manifested in polarised politics, culture wars, conflicts over inequality and race, and intergenerational tensions over climate change and rampant consumerism.
The social pact needs to be rewritten to diffuse the dangerous social pressures that are building up in many European societies. In this article, I will look at some of the essential design features of the new social contract aiming to do justice to those retiring from work.
The first essential is ensuring sustainable social security benefits for the most vulnerable. Retirees already living in abject poverty need our support to live the remaining years of their life in dignity. They cannot do much to improve their situation, even if past mistakes on their part may be partly to blame. No one deserves to live a life deprived of essential necessities like nourishing food, efficient healthcare and heating.
To reduce the risk of poverty in old age, younger generations must be encouraged to save more during their working lives. The reluctance to promote more compulsory savings will perpetuate the unsustainable trend of social benefits for retirees continuing to be inadequate as inflation erodes the chances of decent lifestyles for future pensioners.
Everyone participates in the social contract every day, and we rarely stop to think about it
Financial education and literacy are other essential pillars for building a sustainable social pact. There is a dire need to improve people’s basic understanding of financial matters, from early childhood through adulthood, to help people make informed decisions. Put simply, we need to discourage the urge for instant gratification in managing our money. Consumerism may help the economy but destroys the prospects of retiring without too much financial worry in old age.
Employers must change the ageist mindset that often dumps too early many middle-aged workers on the human scrap heap. Lifelong learning, longer working lives and flexible retirement are the essential elements that need to become the bedrock of human resources planning.
Employers must also provide people with tools and resources for reskilling and keeping skills up-to-date. This can be done by facilitating options for phased retirement so that people can remain economically active for longer and transition into retirement on their terms.
But workers also need to adapt and be flexible. The last years of working life need not be as rewarding financially as earlier years. Accepting less stressful work, but also less remunerative, is one way of striking a balance between the interests of employers and employees.
Encouraging active ageing will only be successful if public healthcare services reinforce healthy ageing through quality healthcare. It is also the responsibility of employers to provide access to healthy work environments and workplace wellness programmes for all their employees.
Rewriting the social pact that supports an age-friendly society will not be easy. The present system is malfunctioning. A recent study confirms that four out of five people in Europe feel that the social support system is not working for them. In most advanced economies, parents fear that their children will be worse off than they are.
We need to ask ourselves: “Do we have what it takes to acknowledge the debt we owe each other?”