Social model

A social, or socioeconomic, model, is the way in which society functions within a state. There are no set rules that define a social model, only loose definitions characterized by certain attributes.

Taxation
How the state taxes the people, be it a flat tax, regressive tax or a progressive tax system. The amount of taxation is also crucial, as lower tax rates can be more business friendly, generating jobs and reducing unemployment, whereas higher taxes can be used to fund public services, state pensions and unemployment benefits.

The Welfare State
How the state implements benefits for the unemployed, pensions, maternity leave and disabilities. A lower welfare state requires less taxation, but relies on the economy to guarantee that the population is employed. Countries with more generous welfare states, such as Denmark, impose income taxes up to 60%, with other social taxes on top and then a sales value added tax of 25%. These taxes are redistributed by the state to various parties, such as the unemployed.

Public services
Services such as health care can be almost entirely state funded at one extreme, private insurance-based on the other, or somewhere in between. Like the welfare state, this is linked to the level of taxation. For example, the United Kingdom has an almost entirely publicly funded health service, the National Health Service (NHS), and Canada offers public health care offered at a provincial level. Conversely, in the United States, individuals have to rely on health insurance policies in the event of hospitalization, and a minimal amount of state support for the poorer people exists. Another element can be public transport, as some countries have nationalized rapid transit systems, while others have privatized them (in the UK for example, public transport has been privatised in Great Britain but not in Northern Ireland).

Employment
Economies with a more liberal approach to employment will rely on the free market to create jobs and a flexible economy to help people keep them; other countries will rely on a high degree of regulation and strict hiring and firing rules to ensure workers are protected from losing their job when companies are required to make layoffs. France is a good example of this regulation and strict hiring. According to recent studies done, French citizens between the ages of 15 and 25 have been going on strike due to unemployment rates.

Anglo-Saxon
Used by the UK and Ireland, the Anglo-Saxon model has a lower degree of job protection, which allows for easier hiring and firing by companies, and a more dynamic economy that is very good at generating jobs. Unemployment is low, especially in the UK and Ireland where the unemployment rate is well below the European Union average. However there is a smaller welfare state compared to other European countries (the UK welfare state stands at 22% of the national budget) – though it is larger than the welfare state of the United States, which is just 15%.

Continental European
Used by France, Germany, Belgium and Luxembourg, the Continental model has strict rules on job protection and a large amount of regulation in industry. However, the labour market has proven to be inflexible and slow to react to globalization. Generous insurance-based unemployment benefits and a well funded welfare state are used to reduce poverty and provide high quality health care.

Mediterranean
Used by Italy, Spain, Greece, Portugal, the Mediterranean model is similar to the Continental model, but focuses welfare on generous state-pensions. The labour market is inflexible with the same job protectionism as in the Continental model, but is not good at reducing poverty within the lower end of society.

The Nordic Model
The Nordic Model is used in Norway, Sweden, Denmark, Iceland and Finland, the social democratic Nordic model advocates a highly developed and government-funded welfare state which provides generous unemployment benefits among other resources for the general public. The model differs from country to country, in some like Sweden job regulation is relatively high and it is difficult to be fired, and in some like Denmark a flexible system of easy firing and hiring have been practiced (see below). The equality of the Nordic model is achieved through higher taxation of the greatest earners within the nation. This tax system is known as egalitarianism, and, as a result of the policy, Sweden, Denmark and Norway have the lowest income disparity in the world, although this comes at a cost, since the most productive members of the society are discouraged from producing more, as they know their higher productivity will be heavily taxed by the state. The Nordic model is generally more decentralized than the continental model, focusing more on local governance.

Flexicurity
Denmark has introduced a model that combines the hiring and firing of the Anglo-Saxon model with the very generous welfare state of the Continental model. This model focuses on employment protection provided by the free-market, with minimal regulation and flexible employment laws; however, it also has retained a generous welfare state that it is claimed is effective at reducing poverty (poverty levels range between 6.5–10%). Unlike the controversial youth employment law proposed in France, Flexicurity does not single out youth. While it has become easier to be fired in Denmark, employers are more willing to hire people, and those who lose their job can also count on unemployment benefits, including numerous training schemes. Sweden has now also expressed interest in Flexicurity to combat unemployment. However, this scheme still requires the extremely high taxes associated with the welfare state in order to fund the high level of benefits on offer. The Mises Institute is highly critical of this approach, claiming it still stifles individual desire to innovate and produce, since most of an individuals' earnings are still paid to the state in the form of higher taxes.