The goal of this article is to provide a balanced assessment of what
has happened to the welfare state in advanced capitalist societies since
1980. What is one to make of recent spending cuts and welfare reforms? Do
they represent a fundamental rollback of the welfare activities of the
state and thus a belated victory for Thatcherite-Reaganite ideas? Or
should these changes rather be seen as incremental adjustments of mature
welfare states, proven to be more enduring than their critics?
Already in the 1970s many observers concluded that the welfare state
had reached its outer limits and began to speak of a crisis of the
welfare state. The rhetoric of crisis was inspired by the idea, shared
by neo-Marxists and neoliberals, that the redistributive logic of the
welfare state was contradicted by the logic of capitalism, and that
the welfare activities of the state would have to be rolled back or
reconfigured so as to conform to the needs of capitalism. With neoliberal
ideas gaining ascendancy in both the United Kingdom and the United States
at the onset of the 1980s, the fate of the welfare state appeared to be
sealed. In retrospect, however, it is clear that Thatcher's and Reagan's
achievements in the realm of welfare reform fell short of what their
rhetoric promised. Against this background, the resilience of the welfare
state has emerged as a prominent theme in the scholarly literature of the
1990s, with Paul Pierson's widely cited World Politics article
of
[End Page 67]
1996 providing, we think, the clearest and most compelling
presentation of the case for welfare-state resilience.
1
Using
this article as a foil, we seek to examine some of the conventional
wisdom in the literature and to sketch an alternative approach to the
study of welfare states in transition.
Basing his argument on aggregate OECD statistics as well as on case
studies of Germany, Sweden, the U.K., and the U.S., Pierson contends that
welfare cutbacks and reforms have been strictly limited in scope. At the
same time, he observes, "the power of organized labor and left parties
has shrunk considerably in many advanced industrial societies." 2 Together, these observations pose a challenge for the power-resource
model developed by Walter Korpi and others to explain cross-national
variations in welfare-state development.
3
The politics of welfare-state retrenchment appear to be fundamentally
different from the politics of welfare-state expansion. Pierson's
notion of a "new politics of the welfare state" yields three specific
arguments to explain welfare-state resilience. First, "the welfare state
now represents the status quo, with all the political advantages that
this status confers."
4
Especially in countries where different
institutions share power, radical reform is inherently difficult. Second,
Pierson argues, welfare cutbacks tend to be associated with high
electoral costs for the simple reason that basic welfare programs
enjoy widespread popular legitimacy. Third, he attributes resilience
to successful mobilization by well-organized groups representing the
interests of consumers of welfare benefits (such as retirees), as well
as employees of the welfare state. The combination of these factors
yields a politics of blame avoidance in which cutbacks can take place
only through incremental and surreptitious mechanisms or during moments
of extraordinary fiscal stress and political consensus.
[End Page 68]
The literature on welfare-state retrenchment raises the thorny question
of how to distinguish radical change from incremental adjustments. For
instance, writing about Sweden in the early 1990s, Pierson states that
conditions were uniquely favorable to a "complete overhaul of social
policy," but even so "there was no sign that the welfare state would
be radically restructured."
5
Exactly what, then, would a
"complete overhaul of social policy" or a "radical restructuring of the
welfare state" entail? And should we not allow for some outcomes that
are neither "incremental adjustments" nor "complete overhauls"? Without
resurrecting the crisis rhetoric of the 1970s and its functionalist
premises, the following analysis shows that major changes have indeed
occurred in the scope and organization of public welfare provision not
only in the U.K. and the U.S., but across the OECD area more generally.
The presentist concerns of the retrenchment literature exacerbate the
conceptual problem of distinguishing incremental adjustments and radical
change. Do cuts in social spending represent a long-term trend or simply
a response to transitory macroeconomic conditions? Like most of the
retrenchment literature to date, Pierson's discussion deals primarily
with the experience of the 1980s. As we update his quantitative and
qualitative evidence, we gain some analytical leverage on trajectories
of change and find that the resilience thesis becomes less compelling.
Going beyond updating, this article seeks to broaden the discussion
of welfare-state retrenchment and, at the same time, to promote a more
careful consideration of measurement issues. Exemplified by Pierson's
work, the existing literature tends to focus on the efforts by politicians
to enact entitlement changes or, more precisely, on the significance
of the entitlement changes that have been enacted. This way of thinking
about welfare-state retrenchment is too narrow. First, recent cutbacks
and welfare reforms must be situated in the context of rising social
inequality and insecurity. Since the late 1970s the dynamics of advanced
capitalism have been undoing some of the postwar achievements of welfare
states. Increased welfare effort would have been required to maintain
these achievements. Moreover, the rise of mass employment and the decline
of employment opportunities for unskilled workers affect the way welfare
states work, irrespective of whether governments cut or reform social
programs. Even in the Scandinavian welfare states, celebrated for their
universalism, the system of social insurance has remained closely tied
to employment. Since about the mid-1980s the number of people who do not
have access to these universalistic
programs
[End Page 69]
and who must instead
rely on means-tested social assistance has increased considerably in
proportion to the total population.
We argue in a similar vein that measuring the size of the welfare state
in terms of social spending as a percentage of GDP, as virtually all of
the literature does, is problematic because such measures fail to take
account of changes in societal welfare needs. The alternative measures
that we propose show that the rapid growth of social spending in the 1960s
and 1970s came to an end in the 1980s and that public services were more
affected by the deceleration of growth than transfer programs. Measuring
the welfare state in terms of the absolute size of the public sector
labor force, we find quite a few instances of actual welfare-state
shrinkage in recent years.
By and large, the retrenchment literature tends to ignore the question
of changes in the delivery of social services or, in other words, the
question of how the public sector is organized. While Pierson does discuss
health care, most of the entitlement programs that he considers are based
on transfer payments. At least in Sweden and the U.K., however, it is in
the realm of public services that we find the most significant cutbacks
and market-oriented reforms. Related to this, finally, we argue that
summing up changes in individual social programs does not provide the
basis for an adequate assessment of what has happened to welfare states
since 1980. We must also consider changes in the overall configuration
of welfare spending, that is, how the allocation of resources among
individual programs might have changed. Thus we propose to explore
not only the extent of welfare-state retrenchment, but also forms of
welfare-state restructuring.
The importance that we assign to the public sector as a site
of service production follows from Gösta Esping-Andersen's
well-known and much-admired comparative analysis of welfare-state
development.
6
As Esping-Andersen points out, the Scandinavian
welfare states are distinguished by their reliance on the direct provision
of services. Yet state-produced services constitute a crucial dimension
of the public provision of social welfare in virtually all advanced
capitalist societies these days.And, to the extent that
it involves nonprofit production and allocation of output according to
political criteria, it is this dimension of the welfare state that most
directly contradicts the logic of capitalism.
[End Page 70]
Population aging and international capital mobility constitute sources of
pressure on contemporary welfare states across the OECD area.
7
Like most students of comparative welfare-state development, we believe
that politics very much affects how these pressures play themselves
out. In our conception of politics, however, societal interests play a
more important role than they do in Pierson's politician-constituent
frame. In Western Europe, at least, mass unemployment has become an
institutionalized feature of labor markets, with long-term unemployment
and early labor-force exit among unskilled workers coexisting with
continued employment security for other segments of the labor force. While
public opinion continues to favor core welfare programs, this situation
has rendered the maintenance of welfare-state universalism politically
more precarious. Also, the antiservice bias of the ongoing restructuring
of the welfare state can be seen at least in part as an expression of
the interests of export-oriented coalitions of private sector employers
and labor.
Though we shall present some quantitative data for a larger set of OECD
countries, our analysis will focus on the four countries discussed by
Pierson. Although he does not explicitly discuss case selection, it seems
clear that the cases were chosen as examples of Esping-Andersen's three
types of welfare states, with Sweden exemplifying the social democratic
type, Germany the conservative type, and the U.S. the liberal type. While
the British welfare state does not fit neatly into Esping-Andersen's typology, the British case deserves our attention as a limiting
case of neoliberal reform of the welfare state since 1980. Nowhere else
has the neoliberal agenda been pursued more rigorously and under more
favorable circumstances.
Growing Market Inequality
In this section we present evidence to support the propositions that
inequality has increased and that security of employment and income has
diminished for many wage earners in advanced capitalist societies since
1980.
8
The literature that emphasizes the resilience of the
welfare state
[End Page 71]
tends to ignore these trends. Pierson and others seem
to take the view that the growth of inequality and insecurity is relevant
only to the extent that it is a direct result of spending cuts or reforms
of the welfare state. In other words, they confine their discussion
to the question of the extent to which the welfare state has become
less redistributive or less effective in providing protection against
market risks. This view fails to incorporate Esping-Andersen's crucial
insight that the activities of the welfare state influence the way that
labor markets operate. Moreover, the context of rising inequality and
insecurity must be considered when we assess the significance of recent
changes in the size and character of welfare states. For example, Swedish
governments lowered the replacement rate of unemployment insurance from
90 percent to 75 percent in the first half of the 1990s. Had unemployment
remained what it had been in the 1980s, these decisions might well have
been described as a minor retrenchment of the welfare state. In the
context of the dramatic increase of unemployment that occurred in the
early 1990s, they take on a different significance.
It is commonplace to measure the distribution of income in terms of the
ratio of income at the lower end of the 90th percentile (the lower end
of the top 10 percent of income earners) to income at the upper end of
the 10th percentile (the upper end of the bottom 10 percent). Referring
to the earnings of full-time employees,
Table 1
summarizes recent
trends in 90-10 ratios in all OECD countries for which such data
are available. For men and women combined, wage inequality increased
sharply from the late 1970s to the mid-1990s in the U.K. as well as
in the U.S. Most other countries experienced increases in the 1-7
percent range, but a handful of countries, most notably Germany, actually
moved in the opposite direction. The trend toward increased inequality
becomes more pronounced when we take gender differentials out of the
picture and especially when we look at the distribution of earnings among
men. The 90-10 ratio for men increased in all but two countries,
Belgium and Germany. In the U.K and the U.S., it increased by more than a
third, and Italy and New Zealand also registered double-digit percentage
increases. In many countries, rising within-gender inequality has been
offset by the continuation of the reduction of gender differentials that
began in the 1960s or 1970s.
9
The figures in Table 1
capture only part of the tendency since
1980 for market forces to generate more inequality. Several other
considerations
[End Page 72]
must be introduced to complete the picture. First,
disparities of income from capital have undoubtedly reinforced the
effects of these trends in the distribution of wage income. Second, the
individual-level trends shown in Table 1
have likely been magnified by
the pooling of wage income within families. For the U.S., Gary Burtless
shows that the correlation between the incomes of spouses has increased
very significantly (well-paid men being increasingly likely to be married
to well-paid women) and that this development accounts for a large part
of the growth of household inequality.
10
Third, the figures presented in Table 1
understate the rise of inequality
because they are restricted to full-time employees. In fifteen out of
nineteen OECD countries for which data are available, the incidence of
part-time employment increased from 1983 to 1996 and in nine of these
countries it increased by more than a third.
11
As women
[End Page 73]
constitute the vast majority of part-time employees in all countries
and part-time employees earn less than full-time employees on an hourly
basis, the proposition that pay differentials based on gender continued
to decline through the 1980s may have to be qualified in light of the
growth of part-time employment. Finally, data on the distribution of
income from employment fail to capture the impact of unemployment. Because
unemployment tends to be concentrated among unskilled, low-paid workers,
it correlates negatively with wage inequality as measured in Table 1
.
12
As the rate of unemployment increases, low-paid workers
disappear from the population used to calculate 90-10 ratios and
the wage distribution becomes more compressed, but we certainly would
not want to conclude from this that unemployment promotes social equality.
Unskilled workers are more likely to become unemployed than more skilled
workers, and their spells of unemployment tend to be longer than those of
more skilled workers. As noted by Andrew Glyn, educational disparities
in labor-force participation have also become more pronounced since
the late 1970s: unable to find jobs, many older unskilled workers
have simply dropped out of the labor force. To capture the combined
effects of employment and earnings disparities, Glyn first calculates
the ratio of the employment rate for male wage earners with higher
education qualifications (college graduates in American terminology)
to the employment rate of male wage earners without an upper-secondary
diploma (high school dropouts) and then multiplies this figure by the
ratio of the average earnings of the former group to those of the latter
group. With both employment and earnings differentials moving against
unskilled workers, the British score on this index of educational
disparities in income from employment (EDDIE) increased by 27 percent
from 1979 to 1991, and the U.S. score increased by the same figure from
1979 to 1991. In Germany between 1978 and 1987 and Sweden between 1987
and 1993, relative earnings trends favoring the least educated were more
than offset by relative employment trends favoring the most educated
and, in each case, the EDDIE index increased by 3 percent over the time
period in question.
13
The incidence of poverty provides another obvious indicator of
social inequality and insecurity. One common measure of poverty is
the
percentage
[End Page 74]
of the population living in households with an
income of less than 40 percent of the median household income. Using
this definition and drawing on data from the Luxembourg Income Study,
Table 2
presents estimates of the incidence of poverty before as well
as after taxes and government transfers for Sweden, Germany, the U.K.,
and the U.S. around 1980 and 1991. In each of these countries poverty
measured in terms of the distribution of "market income" (that is, the
distribution of income before taxes and transfers) increased noticeably
over this relatively brief period of time. The fact that the percentage
of the population receiving some form of means-tested social assistance
increased in fifteen out of eighteen OECD countries from 1980 to 1992
suggests that Table 2
captures a general trend, reversing the prior
trend toward a reduction of poverty.
14
The pervasiveness of
recent inegalitarian trends is indeed striking, especially in view of
the strong tendency among students of comparative political economy to
emphasize national
[End Page 75]
diversity. We hasten to add that common trends
do not necessarily add up to cross-national convergence, for convergence
requires that the most egalitarian countries experience the most rapid
growth of wage inequality, poverty, and so on, and this does not appear
to have been the case.
Alongside the factors typically cited by labor economists
(structural unemployment, immigration, trade with low-wage countries,
technology-driven shifts in demand for labor, and the slower growth of
higher education), changes in labor-market institutions (deunionization
and employer-initiated decentralization of wage bargaining) have
contributed to the growth of wage inequality since 1980. 15 Later in this article, we will suggest that public sector
restructuring has also played an important role. For now, suffice it
to say that while the redistributive effects of taxation and welfare
spending were broadly consistent with labor-market trends in the
1960s, labor-market conditions changed profoundly in the wake of the
international recessions of the 1970s. To maintain the disposable income
distribution that had been achieved by the late 1970s, a significant
expansion of redistributive welfare state activities would have had to
occur in the 1980s.
The Employment Rate and the Welfare State
Before we proceed to a discussion of social policy changes, let us briefly
expand on the point that employment conditions affect how welfare states
work. The Swedish case illustrates this point most clearly.
16
From a comparative perspective, Esping-Andersen is undoubtedly correct to
emphasize the universalism of the Swedish welfare state, but the benefits
provided by many of Sweden's social insurance programs are in fact tied
to employment. Three of the major programs are truly universalistic in
the sense that they are available to every citizen (or resident): family
allowances, health care, and the basic, flat-rate pension. By contrast,
sick pay and parental leave insurance represent government spending on
social welfare that, as a matter of definition, only benefits people who
are employed. In effect, though not by law, the same goes for subsidized
public child care. Finally, entitlements and benefit levels in the
supplementary pension (ATP) system, which accounted for 60
[End Page 76]
percent
of pension benefits paid out by the government in 1994, are determined
by years of employment and income from employment.
In large measure, the universalism that distinguished the Swedish welfare
state in the 1970s and 1980s derived from the universalism of employment
in Sweden. While men's labor-force participation remained constant,
with employed men representing 88.4 percent of the male population
between the ages of fifteen and sixty-four in 1990, women's labor-force
participation increased from 59.4 percent in 1970 to 83.2 percent in
1990. With unemployment at less than 2 percent, the combined employment
rate for women and men stood at 84.4 percent in 1990 (as compared with
67.5 percent for the OECD as a whole). While unemployment rose sharply
in the first half of the 1990s to reach 10 percent in 1996, the labor
force participation of men and women alike fell precipitously. By 1996
the overall employment rate had fallen to 72.7 percent (as compared
with 66.5 percent for the OECD as a whole).
17
In the first
half of the 1990s Sweden's nonworking population of working age nearly
doubled; this represents a major increase in the number of people with
only limited access to universalistic social programs. Badly in need
of public support, many of the people who are no longer employed have
ended up on some form of means-tested social assistance. Without any
policy change, the employment crisis has thus shifted the balance between
"universalism" and "residualism" within the Swedish welfare state.
Sweden's employment rate remains well above the OECD average. What is
unique about the Swedish experience is the fact that the advent of mass
unemployment was delayed for so long and then occurred so abruptly. As
welfare benefits are even more closely tied to employment in other
countries, the argument about the implications of mass unemployment
for the public provision of social welfare sketched here surely applies
more generally.
Measuring Welfare Effort
For the four countries which he surveys, Pierson presents aggregate OECD
statistics on the evolution of social security transfers as a percentage
of GDP, total government outlays as a percentage of GDP, and government
employment as a percentage of total employment. In Pierson's words, the
quantitative data show "a surprisingly high level of
continuity
[End Page 77]
and
stability," and "for none of the countries does the evidence reveal a
sharp curtailment of the public sector."
18
This is indeed a
judicious assessment of the data presented, but the data are problematic
on several counts.
While two of Pierson's time series end in 1990 and the other ends in
1992, "total government outlays" is obviously too broad and "social
security transfers" too narrow a measure of the size of the welfare
state. More importantly, government spending as a percentage of GDP
provides a useful measure of cross-national differences at any point
in time, but the GDP denominator of this measure makes it difficult to
interpret change over time. In the time series presented by Pierson,
two things are changing--the amount of money spent by the government
and the size of GDP--and it is impossible to separate one from the
other. Still more importantly, Pierson's quantitative measures do not
take socioeconomic and demographic changes into account. At any given
level of entitlement provisions, an increase in the number of unemployed,
poor, or retired people automatically generates increased social spending
by the government. Indeed, increased spending might be associated with
a reduction of entitlements. To use government spending as a proxy for
"welfare effort," we must somehow control for these variables.
Table 3
is the upshot of an alternative approach to the problem of
measuring welfare effort or, in a sense, the size of the welfare state. A
[End Page 78]
recently available OECD data set provides year-to-year observations
of total social spending as a percentage of GDP, enabling us to avoid the
unhappy choice between total outlays and social security transfers. Using
these figures and the amount of GDP, expressed in U.S. dollars at 1990
prices and exchange rates, we can compute the amount of total social
spending at constant prices. The poverty rates reported in Table 2
in
turn allow us to divide this figure by the number of people living in
households with a market income of less than 40 percent of the median
household income. Though the figures for total social spending as a
percentage of GDP are available for the entire period 1960-93, the
availability of poverty data restricts the time period over which we
can observe change in this measure. Table 3
reports the annual growth
rate of real social spending per poor person in the 1980s for Sweden,
Germany, the U.K., and the U.S., and compares these figures with the
annual growth rate of real GDP per capita. In all four countries the
growth of real social spending per poor person failed to keep up with
the growth of GDP per capita, and, except for the U.K., the differential
between these growth rates was quite considerable.
Table 4
reports the results of replicating the exercise described above
with a denominator made up of the sum of the number of unemployed
and the number of people above sixty-four years of age for 1960,
1980, and 1993. In all four countries, the growth rate of real social
spending measured in this fashion was much lower in 1980-93 than
in 1960-80. In the U.S. the growth rate in the latter period was
just about half of the growth rate in the former period, and in Sweden
and Germany it was less than a quarter of the growth rate in the former
period. As in Table 3, the U.K. stands out as the country in which real
social spending per person has grown most rapidly since 1980. In view of
the anti-welfare
[End Page 79]
rhetoric of Mrs. Thatcher and her governments, this
is surely a striking finding. Two observations regarding this puzzle
should be made. First, real social spending per poor person (and per
unemployed or aged person) was lower in the U.K. than in the other three
countries at the end as well as the beginning of the 1980s. Second, the
figures in Table 2
show that the ratio of disposable-income poverty to
market-income poverty increased sharply in the U.K. in the 1980s, despite
the growth of real social spending per poor person.
19
More so
than in any of the other three countries, the effectiveness of social
spending in combating poverty appears to have declined in the U.K. The
most obvious explanation would be that an increasing share of social
spending has been allocated to people who are not poor.
Using data reported by Evelyne Huber and John Stephens in a recent
paper, Table 5
illustrates another way to measure changes in the size
of the welfare state relative to societal needs. The measure here is
public health spending as a percentage of total health spending. From
1980 to 1993 this figure fell in ten of the seventeen OECD countries for
which data are available and essentially remained unchanged in another
three countries. Even in those countries where the government's share
of total health spending continued to increase, the rate of increase
was, on an annual basis, much slower in this period than it had been
in the previous two decades. One might perhaps argue that the growth of
private health spending is primarily a matter of satisfying "frivolous"
health care needs, such as cosmetic surgery, and that public programs
continue to provide adequately for "basic needs." But waiting lines have
become longer and the quality of health services provided by the public
sector has deteriorated in at least some countries. As health care needs
change, moreover, it is far from obvious where to draw the line between
frivolous and basic services.
The Size of the Public Sector
Table 6
summarizes the real growth of final consumption expenditure
(that is, the costs of goods and services produced by the public sector)
in seventeen OECD countries over the period 1960-94. Like total
government outlays, this measure encompasses a range of government
activities that have little or nothing to do with the provision of social
welfare, but it speaks more directly to the size of the public sector. As
[End Page 80]
noted earlier, services provided by the government represent an
important component of the welfare state not only in Scandinavia but
across the OECD countries. To conceive this component simply in terms
of health care and social services in the narrow sense of the term (as
the OECD does for the purpose of computing total social spending) seems
unduly narrow. Child care, education, retraining programs, and a great
many other services promote social welfare in general, and at least some
of these services benefit low-income groups in particular.
In all but two countries the average growth rate of real government
final consumption was lower in 1973-79 than in 1960-73 and,
again, in all but two countries, the average rate in 1979-89 was
lower than in 1973-79. In a handful of countries, the growth of
government final consumption rose in the early 1990s, but all of these
countries had comparatively low growth rates in the 1980s. For every
single country, the growth rate of 1989-94 was lower than that of
1973-79 and of
[End Page 81]
1960-73. It would appear that as overall
government spending has slowed down while the costs of social assistance
and social security entitlements have continued to grow, the service
components of the welfare state have been squeezed.
The size of the public sector might also be measured in terms of
employment, but we must beware of the denominator problem. From 1990
to 1994 the public-sector labor force in Sweden declined by nearly 12
percent. As total employment declined even more, however, government
employment as a percentage of total employment actually increased
slightly. To avoid this problem, Table 7
tracks the evolution of the
public sector labor force, measured in absolute terms (people) rather
than in relative terms (percentage of total employment). For nine of
these countries the continuous deceleration story of Table 6
becomes a
story of outright shrinkage of the public sector. Most remarkably, the
size of the public sector labor force declined by nearly 30 percent in
the U.K. from 1988 to 1994.
20[End Page 82]
Given that only some government employees are engaged in welfare-related
activities, to what extent do the employment cuts documented in Table 7
pertain to the public provision of social welfare? In Sweden employment
in public health and hospitals fell by 7 percent, employment in care for
children and the elderly fell by 10 percent, and employment in education
and defense each fell by 4 percent from 1990 to 1993.
21
As
Table 8
shows, the shrinkage of the public sector labor force has been
highly differentiated in the British case. The largest employment cuts
by far have been sustained by central government agencies other than
the National Health Service (NHS) and the military, and the number
of people employed by local government authorities in social services
actually increased from 1985 to 1994 (along with the number of people
employed in the police forces). All of this might be taken as evidence
that overall employment data overstate the extent of welfare-state
shrinkage. The category "other central government,"
[End Page 83]
however,
encompasses welfare-related activities, and employment in both education
and the NHS did shrink significantly over this period.
It may be that public sector productivity growth, notoriously difficult to
measure, has made it possible to provide the same level of services with
fewer employees, but it is hard to believe that labor-force reductions
on the scale observed in Australia, Finland, and Sweden, let alone in
the U.K., do not translate into less public-welfare provision. And,
again, increased societal needs must be taken into account. In view of
the societal changes discussed earlier, the figures presented in Tables
6-7
would appear to represent a rather broad-based reduction of
service-based welfare effort. Be that as it may, these tables call into
question the way that Pierson and other proponents of the welfare-state
resilience thesis seem to conflate continuity with stability. Except in
a couple of instances, final government expenditure on consumption has
continued to grow in real terms, and thus we might say spending patterns
have been stable, but if we compare growth rates in the 1980s and 1990s
with those of the 1970s and 1960s, discontinuity is a prominent
feature of Table 6.
The deceleration of government spending growth might be viewed as a result
of the maturation of welfare states, that is, a result of the fact that
they now provide for basic needs and have perhaps also reached the
[End Page 84]
limits of politically acceptable taxation.
22
Clearly, the
growth of government spending as a percentage of GDP must inevitably
slow down over time. However, there is hardly any correlation, on a
cross-national basis, between annual growth of the public sector labor
force in 1989-94 and 1990 levels of government employment, measured
as a percentage of total employment (r=-.142). The correlation
of annual growth rates of final government consumption in 1979-89
and 1985 levels is also weak (r=-.226).It is not the
case that countries with large public sectors have experienced more
deceleration (or greater public sector cutbacks) than other countries.
Assessing Entitlement Changes
In this section we review and update Pierson's four case studies. We argue
that Pierson's own account of British social policy developments belies
his claim that the Thatcher governments of the 1980s failed to achieve a
significant rollback of the welfare state. For the 1980s the other cases
support Pierson's emphasis on welfare-state resilience. However, the
benefits provided by social-assistance programs deteriorated steadily
in the U.S., and more recently these programs have been dismantled or
profoundly restructured. In the Swedish case and, to a lesser extent,
the German case as well, the politics of austerity in the 1990s has been
accompanied by significant benefit cutbacks and programmatic reforms.
Pierson's account of welfare-state retrenchment in the U.K. focuses on
three primary issue-areas--pensions, income support, and housing --but
it also encompasses two supplemental issue-areas--sickness/
disability support and health care. Summarizing his analysis, Pierson
characterizes retrenchment in pensions and housing as "high," retrenchment
in income-support programs and health care as "low," and retrenchment
in sickness/disability benefits as "low/moderate."
23
Thus
the Thatcher regime apparently achieved significant retrenchment in
only two of the five areas of welfare-state provision on which Pierson
reports. However, the criteria behind this coding of retrenchment outcomes
are not spelled out very clearly, and the coding strikes us as dubious
in several instances.
In particular, Pierson's characterization of retrenchment in British
income support seems to have little to do with the actual level
of benefits across the types of transfers that he covers. Pierson
acknowledges
[End Page 85]
that the income replacement provided by public
unemployment insurance was sharply reduced, that eligibility for
unemployment benefits was restricted, and that that the real value of the
universal child benefit fell by 14 percent in the 1980s.
24
The
expansion of the means-tested Family Credit, he suggests, offsets these
cuts. However, in the context of mass unemployment, it seems reasonable
to discount the impact of tax credits in offsetting cuts in support for
children, the unemployed, and the poor. In any case, the expansion of
the Family Credit allowance clearly constitutes a shift of resources
toward means-tested welfare provision.
Pierson correctly points out that public health care spending has steadily
increased in real terms since 1981 and that the 1990 reform of the NHS
preserved publicly financed care, but there is a lot more to the story
of British health care. Most informed observers argue that, despite real
growth, NHS spending fell well short of increases in demand for health
care in the 1980s, resulting in substantial shortages of care in some
parts of the country. While fees and charges in the NHS increased from
1.9 percent of total spending in 1979 to 3.2 percent in 1994, the role of
private enterprise within the health care sector increased considerably
under Thatcher and Major. This combination of underfunding, increased
fees, distorted priorities (for example, a huge increase of managerial
staff within the NHS), and creeping privatization warrants a less sanguine
assessment than Pierson offers.
Turning to the U.S. experience, the absence of any significant cuts in
social security and Medicare benefits lends support to the resilience
thesis, but Pierson's characterization of income support as an instance
of low retrenchment is again questionable. Jens Alber's analysis shows
that the maximum food stamps benefit stagnated in real terms and fell
in relation to earnings during the Reagan and Bush years. Alber also
shows that the percentage of poor households receiving AFDC benefits fell
sharply in the early 1980s and never regained its previous levels, while
the maximum benefit for such a family of three fell from 67 percent to
36 percent of the poverty level.
25
The drive to reduce antipoverty spending in the U.S. was capped by the
welfare reform bill signed by President Clinton in July 1996. This bill
cut food stamp benefits by $24 billion, denied immigrants eligibility
for food stamps, restricted social security eligibility for disabled
immigrants and children, and cut federal funding for social services and
[End Page 86]
child nutrition programs. Most importantly, however, it replaced AFDC
with block grants to the states, with no minimum requirements pertaining
to either eligibility or benefit levels, but mandating a five-year
lifetime limit on receipt of benefits and requiring 50 percent of each
state's caseload to be working for benefits by 2002. Though cushioned
by economic growth, the distributive consequences of this reform are
still considerable. At the time that the reform was passed, the Urban
Institute estimated that it would result in some income loss for 11
million families, and move 2.6 million people, including 1.1 million
children, into poverty.
26
While the resilience of more universalistic government programs
(middle-class entitlements) remains a conspicuous feature of the
American case, changes in the realm of employer-organized welfare
schemes also deserve to be noted here. According to Esping-Andersen,
"Private coverage in health and pensions has declined steadily during
the 1980s, particularly among young and low-wage workers."
27
In contrast to the U.S., the benefit cuts introduced by Swedish
governments since 1990 have been spread more or less evenly across the
entire range of entitlement programs. Through a series of piecemeal
changes, implemented by both social democratic and nonsocialist
governments, the earnings replacement provided by sick pay, parental
leave, and unemployment insurance has been reduced from 90 percent to 80
percent and waiting days have been introduced for unemployment benefits
as well as sick pay.
28
While the real value of pension
benefits has been cut through changes in indexation, the qualifying
conditions for early retirement have been tightened. The general child
allowance, supplementary allowances for families with more than one
child, and need-based housing subsidies have also been cut on the order
of 10-15 percent.
As of 1994 the funding of public health care in Sweden has been
partially shifted to employee-paid payroll taxes. At the same time,
fees charged for doctor's visits and copayments for medications have
increased sharply over the last ten years. Also, the sick pay reform
of 1991 shifted responsibility for the first fourteen days of sick
pay to
employers,
[End Page 87]
creating an incentive for employers to reduce
absenteeism by improving the workplace environment and/or by monitoring
employees to prevent abuse of sick-pay provisions. Reinforcing workers'
dependence on their employers, this reform must be considered a step in
the direction of "recommodification." Most importantly, the principles
of pension reform agreed to by the major political parties provide for
shifting the financing of pension benefits toward employee contributions
(the current system being based entirely on employer contributions) and
the introduction of privately managed individual retirements accounts
(to receive roughly 10 percent of total contributions).
Of the four countries surveyed by Pierson, Germany provides the
strongest and most consistent support for his emphasis on welfare-state
resilience. Like the Swedish welfare state, the German welfare state
remained intact through the 1980s. As Alber shows, the real value of
both pension benefits and social assistance grants fell in the late
1970s and early 1980s; yet each program subsequently recovered lost
ground and, in marked contrast to U.S. income-support programs, benefit
levels grew in line with average earnings from the mid-1980s through
the mid-1990s.
29
The process of German unification initially
served to boost social spending, but its long-term fiscal consequences,
combined with the Maastricht criteria for monetary union, precipitated
significant cuts in welfare entitlements in 1994-96.
30
Summarizing some of these entitlement changes,
Figure 1 plots the
evolution of the "social wage" from the early 1960s through the mid-1990s
in the four countries. As operationalized in this figure, based on OECD
data, the "social wage" refers to the gross income replacement provided by
the welfare state to an unemployed person over five years, and encompasses
social assistance and guaranteed-income schemes, as well as unemployment
insurance benefits.
31
In all four countries the five-year
replacement rate increased in response to initial employment problems in
the 1970s. In the Swedish case this upward movement continued through most
of the 1980s, when the five-year replacement rate reached 30 percent, but
a decline of several percentage points occurred in the first half of the
1990s. In Germany the five-year replacement declined steadily from about
30 percent in 1979 to less than 27
[End Page 88]
percent in 1995. In the U.S. the
rate fell from an all-time high of 15.5 percent in 1977 to 11 percent in
1987, and has subsequently remained more or less constant. The long and
precipitous decline of the social wage in the British case, from more
than 27 percent in the late 1960s to about 18 percent in the mid-1990s,
represents the most outstanding feature of Figure 1.
[End Page 89]
The Changing Composition of Social Spending
From the analytical perspective of the welfare-state literature,
summing up changes in individual social programs hardly provides an
adequate basis for assessing the extent to which welfare states have
changed, for the central concern of this literature is with relations
among social programs, in other words, with the overall configuration
of welfare states. One interpretation of Esping-Andersen's work
holds that all welfare states consist of three basic components--a
universalistic component providing benefits as a matter of citizen
rights, a social-insurance component linking benefits to employment, and a
means-tested social-assistance component --and that the types of welfare
state are essentially distinguished from each other by the relative
weight that they assign to these three components. The question becomes
whether there have been significant shifts in the mix of welfare-state
components over the last fifteen or so years. Showing the distribution
of total social spending by type of spending in 1980 and 1993,
Table 9
represents a first stab at this question.
In the Swedish and British cases alike, we observe two important changes:
first, a shift of social spending from services to transfer payments and,
second, a shift of spending on transfers from social insurance schemes
to social assistance. The former shift is particularly pronounced in the
Swedish case, and the latter is most pronounced in the British case. In
the case of the U.S., we observe that the relative importance of public
health spending rose at the expense of social insurance, suggesting that
rising health care costs have been a major factor behind the continued
growth of social spending. In a European context the increased relative
importance of health spending would represent an increase in the service
intensity of the welfare state, but in the U.S., of course, public
health spending primarily takes the form of transfer payments. Consistent
with our earlier discussion, Germany stands out in Table 9
as a case of
remarkable stability.
The spending figures in Table 9
do not fit Esping-Andersen's conceptual
categories perfectly. While transfer payments may be provided on a
universalistic basis rather than being tied to employment, services may
be provided on a means-tested basis. Recognizing the limitations of
these data, Table 6
lends at least some support to the idea that the
Swedish welfare state has become institutionally more like the German
welfare state and that the British welfare state has become more like the
American welfare state.
32
Based on this limited sample of OECD
countries,
[End Page 90]
it would appear that universalistic service-based welfare
states have undergone more far-reaching changes than social-insurance or
residualist welfare states. Yet the trajectory of change in the Swedish
and British cases is clearly different, suggesting that partisan politics
still matters.
Reforms of the Public Sector
As noted earlier, government spending on social security transfers has
tended to grow more rapidly than final consumption spending in most
countries since the late 1970s. Across the OECD area we also observe
important changes in the organization of the public sector and how it has
delivered services to its "customers" over the last decade or so. In this
section we briefly review public sector reforms in Sweden and the U.K. and
consider their distributive implications. We are interested both in how
these reforms affect the quality of welfare services provided by the
state and access to services for different categories of the population
and in what they imply for employment conditions and wage distribution
in the public sector.
It should be noted at the outset that public sector reforms have not
specifically targeted welfare activities in either country. Rather,
organizational changes within health care, elderly care, social work,
and so on have been part of a broader process of restructuring the public
sector.
[End Page 91]
In this area, as in many others, it is difficult to discuss
the welfare state in isolation, as if it were a detachable appendix of
the modern state.
In the early 1980s the Swedish social democrats established a new ministry
to oversee public sector reform. Originally oriented toward promoting
democratic participation, public sector reform has increasingly emphasized
cost reduction. Increased autonomy for administrative agencies and local
governments has been accompanied by new forms of accountability to the
central government, which has increasingly stipulated desired outputs and
budgetary constraints while leaving it to managers to determine how to
deploy the organization's resources. To encourage long-term improvements
in efficiency, the government also began to allow unit managers to retain
a share of user fees in the 1980s. Exemplifying a general trend among
OECD countries, the administrative mechanisms of the Swedish welfare
state increasingly mimic those of private corporations.
33
While a number of state agencies were transformed into state-owned
corporations in 1985-95 and thus moved off the government budget
altogether, many state-owned corporations have been at least partially
privatized. As a result of rationalization as well as privatization,
employment in the Swedish state enterprise sector fell from 330,000 in
1980 to 210,000 in 1994.
34
The social democratic approach to
privatization in the 1980s clearly excluded welfare-related services,
but during the bourgeois coalition government of 1991, a number of new
legislative enactments promoted private alternatives to state-provided
services, and these measures were not reversed when the social democrats
returned to power in 1994. State subsidies are now available on a
restricted basis for private child care and education, and the so-called
house doctor system has introduced an element of private practice into
health care. From 1988 to 1994 private employment increased from 1
percent to 5 percent in child care, and from 6 percent to 7 percent in
health care.
35
In comparison with the British case, Swedish privatization has been
very limited in its scope. In the U.K. the labor force of nationalized
industry fell from 1.8 million in 1979 to less than half a million in
1997.
36[End Page 92]
In contrast to Sweden, the effort to shrink
and marketize the state led Britain's conservative governments to
increase central government control over local governments and other
units. At the same time the civil service has been subject to a series
of reforms intended to reduce staffing levels, to increase managerial
flexibility, and to make departmental cost centers more accountable
for financial performance. Of more immediate relevance to our present
concerns, the Tories introduced market principles into the National
Health Service and the state education system for England and Wales in
the late 1980s. In both areas authority for budgetary and personnel
decisions was devolved to unit-level managers. NHS hospitals were
converted to trusts and now have the status of public corporations,
with the ability to borrow independently for capital expenditure and
to retain operating surpluses. General practitioners may now opt out
of the NHS and establish a fund-holding practice to which the central
government allocates a budget. Fund-holding gps, hospital trusts,
and health authorities are expected to contract independently for
the services they require.
37
Schools have also been given
the possibility of opting out of local government control to become
grant-maintained institutions, receiving funding directly from the
central government. While school principals have gained responsibility
for personnel and budgetary decisions, parents have gained the right to
choose schools for their children. School and hospital budgets are now
largely determined by the number of students and patients they attract,
increasing the incentives for unit managers to economize on costs.
The Tories also sought to increase private provision of education
and health services by subsidizing tuition for private school and
premiums for private health insurance. From 1979 to 1991 the number
of private health insurance policyholders increased from one million
to three million.
38
By compelling unit-level managers to
subject stipulated contracts to an open-bidding procedure referred to
as compulsory competitive tendering, the government encouraged private
competition in hospital cleaning, catering, and laundry services, as well
as in local government services. From 1979 to 1994 private employment
increased from 15.9 percent to 39.6 percent of total health-related
employment.
39
In Sweden and the U.K. alike, public sector restructuring has involved a
sustained effort to decentralize wage-setting mechanisms within the public
sector so as to allow unit managers to respond more
[End Page 93]
effectively to
local labor-market conditions and to incorporate productivity-enhancing
incentives into their pay systems.
40
The significance of
the decentralization of wage setting within the public sector should
be seen against the background of public sector wage bargaining in both
countries taking on a particularly solidaristic cast from the late 1960s
onward. With public sector wage compression putting pressure on private
employers to raise the relative wages of unskilled workers, especially
women, the expansion of public sector employment contributed to the
decline of overall wage inequality in this period.
41
As Table 10
indicates, aggregate wage dispersion remained more or
less constant in the British public sector, while it rose steadily in
the private sector from 1984 to 1995. However, significant dispersion
occurred among both men and women working in the public sector. In the
course of the 1980s the dynamics of public sector wage setting became
distinctly less solidaristic, and there is every reason to believe that
this change is, in part, attributable to market-oriented reforms.At the same time, of course, public sector employment cutbacks and
privatization have served to shift labor from the public sector (with
more compressed wage differentials) to the private sector (with less
compressed wage differentials). At least in the British case, not only
has the welfare state failed to keep up with rising market inequality in
recent years, but welfare-state restructuring has itself been a source
of rising market inequality.
The question of how market-oriented reforms of the public sector have
affected quality of services and equality of access is of central
importance, but there is very little systematic evidence on this score
and it is virtually impossible to separate the effects of marketization
from the effects of cutbacks. While consumer choice has been the focus
of much of the rhetoric in support of public sector reforms, critics of
Thatcherism argue that marketization has undermined universal access to
high-quality services by generating both regional and status tiers within
the welfare state. The fact that an increasing number of middle-class
Britons opt for private alternatives over free public services is
indicative of the deterioration in quality and, at the same time, signals
a source of inequality. According to the well-respected King's Fund
Institute, patients of fund-holding general practitioners routinely
receive
preferential [End Page 94]
treatment in the NHS system.
42
In a similar vein, Swedish research shows that the reorganization of
elderly care "has affected working class elderly much more than it has
others."
43
Conclusion
Though the willingness of citizens to pay taxes obviously varies with
the political circumstances, there is surely something to the idea that
the overall level of taxation has reached its upper limits in many OECD
countries. At the same time the combination of sluggish productivity
growth and mass unemployment since the late 1970s has meant that
government revenues at a given rate of taxation have grown more slowly
than they did in the 1950s and 1960s, and the internationalization of
financial markets has constrained the ability of government to engage
in long-term deficit spending. Together, these factors have put downward
pressure on overall government spending.
The fact that the British and Swedish welfare states have become
less service-oriented can partly be explained in terms of demographic
changes and the maturation of social insurance systems (the extension of
full pension benefits to all retired people). In these and other OECD
countries final government consumption expenditure continued to grow
(in real terms) through the 1980s; it simply grew less rapidly than
spending on social security transfers. However, it would also appear
to
[End Page 95]
be the case that governments have preferred cutting the public
sector to cutting entitlement programs, and it is first and foremost the
service components of welfare states that have been reformed according
to market principles. This pattern of retrenchment and restructuring does
not seem to accord well with Pierson's assessment of the political risks
entailed when politicians challenge entrenched interests, following from
the common public choice argument that concentrated interests generally
prevail over diffuse interests, for public sector employees constitute
the entrenched pro-welfare constituency par excellence.
What, then, accounts for the antiservice bias of welfare-state
retrenchment? Several arguments seem plausible. Consistent with Pierson's
emphasis on the politics of blame avoidance, one might argue that the
effects of cutting the public sector are less immediate and less tangible
(or less visible) than the effects of cutting entitlement programs. Public
sector cutbacks will likely result in a deterioration in quality and this
in turn might result in middle-class opt out, but such deterioration will
not necessarily be proportionate to spending cuts and no one knows at
which point middle-class opt out becomes a serious problem. Even social
democratic politicians are likely to find the risks involved here more
palatable than those entailed in cutting pension or unemployment benefits.
Second, the popular legitimacy of programs based on the social insurance
principle might be invoked to explain the antiservice bias of recent
cutbacks. As Esping-Andersen argues with reference to the welfare states
of continental Europe, the consensual manner in which such programs were
developed and the sense of entitlement that the insurance system produces
make it very difficult to reform these transfer programs.
44
Third, the preference for social-insurance welfarism may reflect anxieties
about further European integration, insofar as EU legislation outlaws
discrimination on the basis of nationality. Since social-insurance
benefits are typically based on income from employment, such programs
sidestep the political problem of foreigners taking advantage of generous
benefits.
45
Most importantly perhaps, the patterns of retrenchment we have
documented might be seen as a response to political pressure from
a cross-class coalition of employers and workers in the export and
multinational sectors. Both Peter Swenson and Herman Schwartz argue that
[End Page 96]
with increased openness and intensified international competition,
workers and employers in exposed sectors become acutely concerned with
containing the upward pressure on domestic costs generated by large
public sectors.
46
In this context a new political-economic
cleavage between sheltered and exposed sectors opens up and the exposed
sector coalition exerts increasing pressure for public sector reform. It
is important to recognize that this coalition is based on compromise
among its constituent units, rather than on a complete convergence of
interests. Left to their own devices, export-oriented employers would
probably have favored across-the-board cuts in the welfare state, but
the maintenance of basic social insurance entitlements is a condition
for private sector unions to support public sector cutbacks and reforms.
This coalitional account works better for some countries than for
others. In the British case electoral support for Thatcherism certainly
had a broad cross-class character, but Mrs. Thatcher's efforts to
restructure the public sector did not involve the cooperation of private
sector unions, and business support came mainly from the financial
sector rather than from export-oriented manufacturers. The British
case would have to be couched in terms of a cross-class coalition
centered on financial interests, including the financial interests of
working-class homeowners and shareholders, and forged electorally rather
than organizationally.
Thinking about public sector restructuring in these terms, it should be
noted that market-oriented reforms have had different consequences for
different segments of the public sector labor force. In the British
case the ratio of median public sector to private sector wages
for blue-collar workers fell from 1.05 in 1984 to .98 in 1995, but
the public-private ratio for white-collar workers remained stable at
1.09-1.10.
47
This divergence of fortunes helps explain why
public sector unions were not able to mobilize more effective resistance
to market-oriented reforms.
In his analysis of Thatcherism and Reaganism, Pierson distinguishes
between "programmatic" and "systemic" retrenchment. While programmatic
retrenchment refers to reductions in spending or benefit levels, the
introduction of means testing, and so on, systemic retrenchment entails
long-term changes in the political environment that make the welfare
state vulnerable to future attacks. Largely on the basis of public-opinion
polls, which show that popular support for core components
of the welfare state remains strong, Pierson argues that further, more
[End Page 97]
drastic welfare-state curtailments are unlikely in the British
case.
48
However, the contrast between the Labour Party's
dismal electoral performance in the 1980s and early 1990s, when it stood
stoutly by traditional welfarism, and its recent electoral triumph as a
revamped party committed to fiscal rectitude and low taxes suggests that
the meaning of public opinion polls may be more ambiguous than Pierson
allows. From the perspective adopted here, it is striking that Pierson's
discussion of systemic retrenchment in the U.K. does not consider the
impact of Thatcherite policies on public sector unions. In the 1960s
and 1970s unionized public sector employees emerged as a key political
constituency for the Labour Party and the welfare state. The cutbacks
and restructuring described above have clearly weakened the market power
of public sector unions and their ability to mobilize politically. In
some instances, market-oriented reforms have also created incentives
for them to eschew "political unionism" in favor of a more economistic
or professional orientation.
49
As public sector employees constitute a key constituency of parties on the
left in most countries, the idea that public sector reform represents a
form of systemic retrenchment as well as programmatic retrenchment would
seem to be more broadly applicable. Despite the absence of politicians
attacking the welfare state in Thatcher fashion, political and economic
conditions in the second half of the 1990s are surely more favorable
to welfare-state cutbacks and restructuring than they were in the
second half of the 1980s. In Western Europe this is also a result in
some measure of the constraints imposed by the Maastricht criteria for
monetary union. Whether the current contractionary environment represents
a transitional phase or a more permanent condition remains an open
question, with important implications for the future of the welfare state.
Whereas Pierson essentially accepts the class-power model associated
with Korpi as a valid explanation of postwar welfare-state expansion
and argues that the politics of the welfare state have fundamentally
changed, we believe that the coalitional approach suggested here
sheds light on the past as well as the present. Societal interests and
coalitional alignments have changed, but there is no need to invent a
new set of analytical categories in order to explain current patterns
of welfare-state retrenchment and restructuring.
Richard Clayton is a Ph.D. candidate in the Government Department at Cornell University. His dissertation, "Public Workers in Privatizing States," analyzes the causes of public sector reorganization and its consequences for the politics of public sector unions, with special emphasis on the British experience.
Jonas Pontusson is Associate Professor of Government at Cornell University. His publications include The Limits of Social Democracy: Investment Politics in Sweden (1992) and, as coeditor, Bargaining for Change: Union Politics and Intra-Class Conflict in Western Europe and North America (1992) and Unions, Employers and Central Banks: Wage Bargaining and Macroeconomic Regimes in an Integrating Europe (forthcoming). His current research focuses on the interface of social policy regimes and labor markets.
* For comments on previous drafts of this paper, we wish to thank Geoffrey
Garrett, Alex Hicks, Paul Pierson, Martin Rhodes, Herman Schwartz, Duane
Swank, Kees van Kersbergen, three anonymous reviewers, and the members
of the Political Economy Research Colloquium at Cornell University. We
are also indebted to Lane Kenworthy and Duane Swank for their help with
data collection.
Notes
1.
Pierson, "The New Politics of the Welfare State," World
Politics 48 (January 1996). Pierson's article builds on his book,
Dismantling the Welfare State? (New York: Cambridge University
Press, 1994), which analyzes the Thatcher and Reagan experiments in
detail. Other comparative analyses emphasizing the resilience of welfare
states include Geoffrey Garrett, Partisan Politics in the Global
Economy (New York: Cambridge University Press, 1998); John Stephens,
Evelyne Huber, and Leonard Ray, "The Welfare State in Hard Times," in
Herbert Kitschelt et al., eds., Continuity and Change in Contemporary
Capitalism (New York: Cambridge University Press, forthcoming); and
Duane Swank, "Social Democratic Welfare States in a Global Economy,"
in Robert Geyer, Christine Ingebritsen, and Jonathon Moses, eds.,
Globalization, Europeanizationand the End of Scandinavian
Social Democracy? (London: MacMillan, forthcoming). For a detailed
critique of Pierson's work, see Jens Alber, "Selectivity, Universalism,
and the Politics of Welfare Retrenchment" (Paper presented at the annual
meetings of the American Political Science Association, San Francisco,
1996); and for a comprehensive review of recent welfare-state literature,
see Kees van Kersbergen, "The Declining Resistance of National Welfare
States to Change?" (Manuscript, School of Public Affairs, University of
Nijmegen, 1997).
6.
Esping-Andersen, The Three Worlds of Welfare
Capitalism (Princeton: Princeton University Press, 1990). The
importance of services relative to transfer payments constitutes the
most obvious basis for distinguishing among "institutional welfare
states" (say, between Sweden and the Netherlands). Esping-Andersen's
concept of "decommodification" partly captures but also blurs this
distinction. Scoring very high on Esping-Andersen's decommodification
index, the Scandinavian welfare states have traditionally promoted
labor-force participation and strengthened the power of wage earners
as sellers of labor power (rather than reducing their dependence on the
sale of labor power).
7.
While everyone agrees that demographic pressures are
important, the claim that international capital mobility exerts
pressure on welfare states is contested by both Garrett (fn. 1) and
Swank (fn. 1). It is neither possible nor necessary to develop and
support this claim here. Suffice it to say that the question of whether
capital mobility exerts downward pressure on welfare states should not
be conflated with the question of whether capital mobility produces
convergence among welfare states. The evidence presented by Garrett and
Swank speaks primarily to the latter question.
8.
It is sometimes argued that the fundamental purpose of
the welfare state is to provide for social security and that only some
welfare states (in the first instance, the Scandinavian welfare states)
have had redistributive ambitions as well. While welfare states clearly
vary in their redistributive effects, we find this argument somewhat
dubious: since some groups are far more insecure than others in a
capitalist society, the public provision of social security is itself
a redistributive activity.
9.
Cf. OECD, Employment Outlook (Paris: OECD, July
1996), chap. 3; and Pontusson, "Wage Distribution and Labor-Market
Institutions," in Torben Iversen, Jonas Pontusson, and David Soskice,
eds., Unions, Employers and Central Banks (New York: Cambridge
University Press, forthcoming).
10.
Burtless, "Widening U.S. Income Inequality and the Growth
of World Trade" (Manuscript, Brookings Institution, 1996).
11.
OECD, Employment Outlook (Paris: OECD, July
1997), 177.
12.
See David Rueda and Jonas Pontusson, "Wage Inequality and
Varieties of Capitalism" (Working paper, Institute for European Studies,
Cornell University, 1997).
13.
Glyn, "Unemployment and Inequality," Oxford Review
of Economic Policy 11 (Spring 1995), 10-11. As these figures refer
to men only, the problem of factoring part-time employment into
the calculation of employment rates can safely be ignored.
14.
See Ian Gough et al., "Social Assistance in OECD Countries,"
Journal of European SocialPolicy 7 (February 1997),
24-27. Of course, the percentage of the population receiving social
assistance might also increase because of political decisions to broaden
the coverage of social assistance programs or to cut the benefits provided
by more universalistic welfare programs. By the same token, poverty must
be measured in terms of market income as well as disposable income in
order to distinguish the effects of market forces from the effects of
changes in social policy. Finally, it should be noted that the figures
in Table 3.
refer to relative poverty, as distinct from the absolute
measures, such as the official U.S. poverty line. The percentage of
the U.S. population living in households with a disposable income below
the official poverty line fell from 22 percent in 1960 to less than 12
percent in 1973-79, and then began to rise, reaching 16-17
percent in the early 1990s; see Rebecca Blank, It Takes a Nation
(Princeton: Princeton University Press, 1997), 55.
15.
Pontusson (fn. 9); and Rueda and Pontusson (fn. 12). For
comparative analyses of wage inequality trends by labor economists,
see various contributions to Richard Freeman and Lawrence Katz, eds.,
Differences and Changes in Wage Structures (Chicago: University
of Chicago Press, 1995).
16.
The basic argument of this section is suggested by Sune
Sunesson et al., "The Flight from Universalism," European Journal of
Social Work 1, no. 1 (1998).
17.
In 1996 the rate of male labor-force participation was 81.6
percent, and the rate for females was 76.3 percent. OECD, Historical
Statistics (Paris: OECD, 1997); and OECD, Employment Outlook
(Paris: OECD, July 1997), statistical appendix.
18.
Pierson (fn. 1, 1996), 158-59. Cf. also
Esping-Andersen, "After the Golden Age?" in Esping-Andersen, ed.,
Welfare States in Transition (London: Sage, 1996), 10-11.
19.
The U.K. ratio of disposable-income poverty to market-income
poverty increased from .16 to .21 over the time period covered by
Table 3. By contrast, the German ratio increased from .15 to .17, the U.S. ratio
held steady at .56, and the Swedish ratio declined from .38 to .18.
20.
As state-owned corporations are not included in the OECD
measure of government employment, these figure reflect the government
agencies in corporate form but not the privatization of state-owned
corporations.
21.
Margareta Ringqvist, Om den offentliga sektorn
(Stockholm: Fritzes, 1996), 111-13.
28.
Social insurance replacement levels were cut from
90 percent to 80 percent by the bourgeois coalition government of
1991-94. The social democrats cut them further to 75 percent in 1995
but subsequently restored these cuts. This summary of Swedish changes
draws primarily on Joakim Palme and Irene Wennemo, Swedish Social
Security in the 1990s (Stockholm: Ministry of Health and Social
Affairs, 1998). Cf. also Stephens, "The Scandinavian Welfare States,"
in Esping-Andersen (fn. 18).
30.
See Joyce Mushaben, "Restructuring the German
Sozialstaat" (Paper presented at the annual meeting of the American
Political Science Association, Washington, D.C., September 1997).
31.
The data points in Figure 1 are the average replacement
rate for workers at 66 percent and 100 percent of the average production
worker's income in three different family situations (single, married with
a dependent spouse, and married with a working spouse). For more details
on this measure, see OECD, TheOECD Jobs Study: Evidence and
Explanations (Paris: OECD, 1994), chap. 8.
32.
For a broader discussion of Swedish convergence on the
German model, see Pontusson, "Between Neo-liberalism and the German Model:
Swedish Capitalism in Transition," in Colin Crouch and Wolfgang Streeck,
eds., Political Economy of Modern Capitalism (London: Sage, 1997).
33.
Cf. Herman Schwartz, "Small States in Big Trouble: State
Reorganization in Australia, Denmark, New Zealand, and Sweden in the
1980s," World Politics 46 (July 1994). See also Colin Fudge and
Lennart Gustafsson, "Administrative Reform and Public Management in
Sweden and the United Kingdom," Public Money and Management 9
(Summer 1989); and Rune Premfors, "The 'Swedish Model' and Public Sector
Reform," West European Politics 14 (July 1991).
40.
See Lois Wise, "Whither Solidarity? Transitions in Swedish
Public-Sector Pay Policy," BritishJournal of Industrial
Relations 31 (March 1993); and R. F. Elliott and K. Duffus, "What
Has Been Happening to Pay in the Public Service Sector of the British
Economy?" British Journal of IndustrialRelations 34
(March 1996).
41.
Cf. Pontusson (fn. 9); and Rueda and Pontusson (fn. 12).
42.
David McKie, The Guardian Political Almanac 94/95
(London: Fourth Estate, 1994).
44.
Esping-Andersen, "Welfare States without Work," in
Esping-Andersen (fn. 18).
45.
Cf. Wolfgang Streeck, "Neo-Voluntarism: A New European
Social Policy Regime?" in Fritz Scharpf, Philippe Schmitter, and Wolfgang
Streeck, eds., Governance in the European Union (London: Sage,
1996).
46.
Schwartz (fn. 33); and Swenson, "Labor and the Limits of the
Welfare State," in Miriam Golden and Jonas Pontusson, eds., Bargaining
for Change (Ithaca, N.Y.: Cornell University Press, 1992).
47.
National Statistical Office, New Earnings Survey
(London, various editions).
49.
See Richard Clayton, "Confronting the Market: Public
Sector Unions and Market-Oriented Reform in British Health Services and
Education" (Paper presented at the conference on Distributive Dimensions
of Political Economy, Center for European Studies, Harvard University,
March 1-3, 1996).