The EU’s social investment agenda in an age of fragmentation: beyond lip service?

Amid demographic decline, geopolitical instability and the twin green and digital transitions, the European Union is rediscovering social investment not as a social luxury but as a strategic asset for competitiveness and resilience. This chapter argues that policies which build people’s capabilities – high-quality early education, lifelong learning, gender-equal work–family arrangements and robust social protection – are increasingly central to sustaining Europe’s economic model in the coming decade. While the European Pillar of Social Rights has anchored this agenda, recent debates, including Draghi’s competitiveness report, expose a persistent tension between a narrow focus on skills and productivity and a broader understanding of welfare states as engines of inclusive growth. Against this backdrop, the chapter traces how social investment has evolved from the 1990s to the post-pandemic era, assesses Member State progress in expanding human capital stocks, supporting life-course transitions and strengthening social buffers, and analyses how EU governance has integrated social investment through the European Semester, the Social Convergence Framework and a more socially attuned fiscal rulebook. It further examines the role of EU funding – especially the Recovery and Resilience Facility and the proposed 2028–2034 Multiannual Financial Framework – in shaping national reform trajectories and testing the viability of a “cash-for-reforms” model for social policy. The chapter concludes that the EU’s future prosperity will depend on embedding social investment at the heart of its competitiveness strategy, backed by stronger analytical capacity, coherent governance and predictable financing. In an age of uncertainty, systematic social investment is no longer optional: it is Europe’s most credible route to a resilient, cohesive and future-proof welfare model.