The objective of social policy in a country is to ensure, at least, a socially acceptable minimum standard of living for all its population. Hence, social policy goes beyond employment related issues. It touches people not only when they are at work, but also when they are outside of it or without it. Social policy deals with problems which include wages, unemployment insurance, the welfare system, pensions, health, education, as well as the professional and geographical mobility of labour. The short-run redistributive (security) goal of this policy does not necessarily clash with economic adjustment. In the long run these two objectives supplement each other. There will be no security without adjustment and no adjustment without a certain security in the long run. Social policy should not prevent the economic system from adjusting. On the contrary: it ought to stimulate shifts from low productivity economic structures to those that demand a qualified and highly productive labour and management.
The foundations of a social policy may be traced to the nineteenth century when the social security system was introduced. Between the wars, there was increased concern that economic and social risks should be shared by the whole society. After the Second World War and up to the 1970s a sustained and relatively high rate of economic growth, as well as favourable demographic structure made possible a big increase in social policy expenditure in most developed countries. This has not involved great political costs because the governments’ budgets were able to sustain such outlays without too much trouble. Since the recession of the early 1970s, it became obvious that social expenditure was growing so dear that it posed a threat to the adjustment of the entire economic system. This situation demanded reform. Social policy has been transformed from a safety net designed to ease economic adjustment to a concept whose role is to provide citizens with something approaching property rights or entitlements to the status quo (Courchene, 1987, pp. 8-9). There are attempts to change the welfare state (high degree of income protection and social insurance) into a competition state. However, once the social system is there, it is very hard to reform it downwards. When France tried to do that at the end of 1995, the result was the worst wave of strikes since 1968! In a situation of continuous budgetary deficits, this system can no longer be afforded. Otherwise, it will remain fixed at the present situation and economic adjustment will be unable to take place. The social cost of preserving everybody’s entitlement without any conditions would be endless.