Abstract
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The COVID-19 crisis has left countries puzzled on how to reform their social security systems to increase coverage and adequacy while accommodating the surge towards diversification of labour markets in terms of new forms of work (Eurofound, 2020) and allowing for “work anytime, anywhere” (Eurofound and the International Labour Office, 2017), accompanied by inadequate social protection level (Matsaganis et al, 2016).
Adapting the existing social security frameworks hardly resolves long-term structural issues. Proposal to move towards more universal systems (See for example ILO, 2019) is hindered by welfare regime path dependency (Esping-Andersen, 1990; Ferrera, 1996; 2010; Rhodes, 1996). One could argue that sooner or later countries will have to seek alternatives as digitalization affects welfare services anyway (Buhr et al., 2016 based on Esping-Andersen, 1990) and citizens also expect more digital solutions from the state (Mattfolk & Emfeldt, 2019). Yet, Lewan (2019) points out that thus far the digital government has not changed the structure or processes of the state considerably. The internal modernization of government is thus needed to keep up with the overall technological progress (Buhr et al., 2016).
The proposed paper explores the case of Estonian entrepreneur account and its implications for the potential uptake by other countries with contributory welfare systems. The paper addresses the following questions: What are the benefits and challenges of using digital social security accounts in extending social security coverage among people in non-standard work forms? What are the prerequisites of adopting digital innovation in the domain of social security? What role could digital accounts play in reforming different types of welfare states? The paper relies on 15 interviews with policy makers and account users in Estonia, in addition to analysis of relevant literature and documents. The case is explorative in nature, adopting an interdisciplinary approach of public administration, innovation and welfare state studies. The entrepreneur account, established in 2019, offers a novel way to combine one’s entrepreneurial income from different sources on a private bank account, independent of worker status. Account income is taxed automatically with flat tax rate and taxes count towards social security payments, making it an easy way to improve the social security coverage of the self-employed (incl. platform workers). Using the account involves zero bureaucracy. Thus far the ideas of similar accounts have been proposed in idea papers – such as Digital Social Security (Weber, 2019) and Life Account (Lillrank et al, 2013). Estonia offers the first valuable real-life example. Firstly, it shows that contributory welfare systems may extend the coverage of social security using new approaches. Unintentionally it also solves the question of social security for workers practicing cross-border digital work. While the solution bypasses the issue of worker status, applying it in the existing social security framework renders much of its benefits unreachable for the most vulnerable workers. Users of the solution mostly find its benefits in reducing the administrative burden as their income was either too low or too hectic to receive a continuous health insurance. Secondly, as e-government practices evolve hybrid (private-public) solutions will probably become more prevalent in replacing more traditional approaches of social security solutions, while choosing a hybrid approach entails its own risks. In Estonia just one bank has agreed to offer the account thus far, limiting its user potential. Internal processes and administrative structures play a dominating role in the outcomes of new and innovative solutions than can be expected. Entrepreneur account is no exception.
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