Could it happen? The welfare state as we know it grew out of the “New Jerusalem” spirit in Britain after World War II. Born of the wartime thinking of Keynesian economist William Beveridge, and animated by fear of unemployment, such systems will find it difficult to adapt to the coming world of labor shortages. “The current welfare state was built on the image of risks facing our grandparents’ generation,” says Professor Gosta Esping-Anderson of Universitat Pompeu Fabra in Barcelona. But as the number of Europeans over 60 grows, and the working population shrinks, something will have to give. There simply won’t be enough young people to support retirement for all the old people. Among the solutions: putting more married women to work, opening the doors wider to immigration, making people stay in their jobs to a riper age.
Clearly these changes will be wrenching. And they’re going to happen. Earlier this year the European Commission recommended that the average retirement age be raised a full five years by 2010. Europeans won’t like it, says Bernd Marin of Vienna’s European Center for Social Welfare Policy and Research, but given the choice between higher taxes and working longer, they “may soon agree” to retire later. European resistance to immigration is likely to break down, too. “Nature abhors a vacuum,” says British Tory M.P. David Willetts. “And when the economy needs more workers, societies will accept more migrants.”
For better or worse, post-Beveridge Britain seems the likely model for continental Europe. It has moved further than most from state to private pensions, and even the more generous welfare states–Sweden, Germany–are following its lead. This will help balance the books, but according to University of Kent professor Peter Taylor-Gooby, it will also heighten poverty and income inequality among pensioners. He suggests the welfare state might not be able to avoid “radical change” much longer. If that represents the “end,” the end is near. But the cataclysmic meltdown? Bernd Marin addresses the question this way: “Complete collapse of the system will occur between 2012 and ‘15–if nothing is done.” He expects the state to make minor reforms just fast enough to stay one step ahead of disaster. The welfare-state obits are likely premature, but this much is true: failure to change could be deadly.
