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.

Elements of a Social Model

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Taxation

How the state taxes the people, be it a flat tax or a progressive tax system, in which higher earners are taxed to a greater extent. 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, can impose taxes up to 60%, which allows the state to protect the unemployed, provide larger pensions and provide longer maternity leave (up to 10 months in some countries).

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, as is the case with the UK.

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.

Examples of Social Models

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Anglo-Saxon Social Model

Used by the UK, Ireland and Portugal, the Anglo-Saxon model has a low degree of job protection, which allows for easy 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, the Anglo-Saxon Model is not very successful in reducing poverty, as there is only a small 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 Social Model

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 results in an excellent reduction in poverty and the provision of high quality health care.

Mediterranean Social Model

Used by Italy, Spain and Greece, 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

Used in Norway, Sweden, Denmark, Iceland and Finland, the Nordic model, also popularly known as the "Swedish Model", has a highly developed and government-funded welfare state that provides generous unemployment benefits. Job regulation has been relatively high, and still is in Sweden, for example, where it is difficult to be fired. However, this causes inflexibility in the globalized economy. The equality of the Nordic model is achieved by high taxation of the greatest earners – so much, so that a doctor will earn, after taxes, roughly the same amount as a factory worker. This tax system is known as egalitarianism, and it results in Sweden and Denmark having the least income disparity in the world. Not all countries using a Nordic model will necessarily have an egalitarian society however, and in general, the mindset of the populace in such a socioeconomic model is different than that in "the West", as extreme wealth is frowned upon and high taxation is publicly accepted (especially in Scandinavia).

Flexicurity

Denmark has innovated a promising model that combines the easy hiring and firing of the Anglo-Saxon model with the 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 a generous welfare state that 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, which include further education. Sweden has now also expressed interest in Flexicurity to combat unemployment.