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The chapter discusses how the state, employers, and organized labor promote and reform early retirement policies. What interests do workers, employers, and workplace representatives have in using early exit? Beyond the workplace, interest coalitions may arise among governments, employer associations, and trade unions to externalize restructuration costs, reduce labor supply, and buy social peace.

This chapter analyzes the economic ‘push’ factors that lead to early exit from work. Some firms co-sponsor early retirement via occupational pensions in order to facilitate restructuring. Deindustrialization, mass unemployment, and privatization have increased structural push, with early exit spreading widely across sectors. Two varieties of capitalism can be observed: early exit is used by firms to adapt to regulated labor markets in Continental coordinated market economies, it is more cyclical and infrequent in Anglophone flexible labor markets, while Japan and Sweden are exceptional cases that integrate older workers.

In this third of three chapters on the distinctive policy dynamics of particular areas of social provision, Wood looks at labour market regimes in Germany, Britain, and Sweden. The theoretical starting point of the chapter is an examination of path dependence, perhaps the most popular contemporary approach to explaining the persistence of institutions and policies over time. In principle, this offers an enticing explanation of the resilience of national policy trajectories, although the outcomes it explains have a tendency to be overdetermined, and not all mechanisms generating a bias towards the status quo are path‐dependent ones. The theoretical work of this chapter, therefore, lies in deriving alternative (though not mutually exclusive) micro‐level sources of policy continuity over time, and evaluating their relative contributions to the evolution of labour market policy in Germany, Britain, and Sweden. Divided into four substantive sections: Section 1 discusses the theory of path‐dependent institutional and policy trajectories in politics; Sect. 2 presents three distinct sources of policy continuity (employer‐centred, constitutional, and electoral) that are often bundled together as ‘lock‐in mechanisms’ in path‐dependent accounts; Sect. 3 sketches the changing context of labour market policy in Western Europe by looking at national responses to unemployment from 1980 onwards in each of the three country case studies, and providing accounts of labour market policies, employers’ preferences in relation to labour market policies, and constitutional factors and electoral constraints in relation to labour market reform; Sect. 4 is a conclusion and discusses the thesis offered by the chapter — that the trajectory of labour market policy can be accounted for by an employer‐centred theory of preferences.

Because employers have pre-associational powers and restrictions on the strategies of their associations, employers are likely to prefer individual relations to engaging in collective exchange with labour. The desirability of collective exchange challenged thus their ability to associate and the need to do so must be differentiated. Employers played a key role in shaping the bargaining process as they have an individual and collective option. Also, market-led opportunism posed an unintentional threat from the shift to self-interested ‘short-terminism’ and a deliberate threat from employer disorganization. Unions and employer associations underwent reforms to economize resources and activities and to adapt to the interdependencies of issues and interests.

The politics of migration in the three established countries of immigration, France, Germany, and the United Kingdom, are scrutinized in this chapter, with particular emphasis being placed on an analysis of employers, trade unions, and humanitarian NGOs in attempting to shape national and indirectly European migration policies. In addition, the effects of top-down Europeanization and national initiatives at shaping bottom-up Europeanization are explored. French migration policy has only recently rediscovered active labor recruitment due to relatively belated employer interest. In Germany, employers are most interested in highly skilled migrants both in the manufacturing and service sector, while in the UK, business calls for entry channels both for highly skilled and low-wage low-skill migration, preferably into the service sector. In all countries, NGOs struggle to make their voices heard, though French groups have been successful with direct action.

This chapter turns to an explanation of welfare state development in Sweden, where ironically, the major strides had to wait until the 1940s and 1950s, although Sweden's progressive political forces seemed stronger than America's in the 1930s. First it looks at why. Because of their solidaristic system of labor market governance, capitalists in Sweden would benefit from progressive reforms in times of acute labor scarcity (associated with postwar macroeconomic conditions) rather than the reverse as in the U.S. Then it analyzes how the Social Democratic government's very modest unemployment insurance and pension reforms of the 1930s served solidarism's need for low levels of militancy and heightened labor mobility, and thus helped forge the kind of cross‐class alliance that was to secure a long reign of peaceful relations between labor and capital under a leftist government.

This chapter develops an alternative theory about welfare state development, which posits that reformers try to root their legislation in cross‐class alliances intersecting the internally diverse interests of capital and labor. Reformers appeal to interests in progressive reform deriving from capitalists’ desire for regulation of markets. The theory about the politics of the welfare state draws on labor economics, arguing that macroeconomic shocks to systems of labor market governance (various forms of collective bargaining and managerial relations) create an opportunity for politicians to enlist capitalist support for regulatory assistance through social insurance and labor reform.

This chapter begins the historical analysis of welfare state development by tracing the origins of American segmentalism, a pattern of labor market control marked by decentralized industrial relations, relatively high and downwardly rigid wages paid by many large employers (efficiency wages), and extensive use of company benefits (welfare capitalism). Leading employers in America embarked on their segmentalist strategy early in the 20^th century by breaking with existing and emerging centralized regulation of labor markets (multiemployer collective bargaining), desiring in part to assert absolute management rights against the militant claims of labor unions. For reasons analyzed in Ch. 2, success of the employers gave rise to heightened interests in regulatory social reform in response to the deflationary macroeconomic shock of the Great Depression.

This chapter turns to the dramatically different turn of events in early 20^th century. Sweden, where highly centralized collective bargaining took hold, largely at the behest of employers, accomplished with their effective use of sweeping multifirm and multiindustry lockouts. Securing absolute management rights despite union input in collective bargaining, employers achieved a solidaristic system of labor market regulation in which wages were held below market equilibrium for most firms and wages were standardized or compressed within many industries. The employer confederation was not successful, however, in achieving a desired compression of wages across industries, a goal that was to require labor union help and political intervention, discussed in the following chapter.

This chapter picks up where the last left off, in the 1930s, when the Swedish Social Democratic Party took power, and instead of undermining solidarism, actually helped employers achieve their long sought‐after solidaristic goal of compressing wage levels across industries. During the Great Depression, Social Democratic intervention against militant unions in the building and construction trades brought their wages down to levels long sought by employers, and inaugurated a decade‐long period of labor‐management harmony and consensual politics despite Social Democratic domination. This harmony was based on a cross‐class alliance of interest between major export‐oriented sectors of Swedish industry and the social democratic labor movement, reflected in the details of achievements of other political and industrial relations of the decade: the Social Democratic government's crisis program against unemployment and the famous 1938 Basic (Saltsjöbaden) Agreement between the labor and employer confederations.

This chapter wraps up the analysis of solidarism's development through the 1950s with historical evidence showing how employers strongly favored continued wage compression, a fact that thoroughly undermines the mythology that employers reluctantly traded centralized negotiation of an egalitarian structure of wages across firms and industries in exchange for the labor confederation's suppression of wage militancy. Wage solidarism and restraint, consensually pursued in multiindustry collective bargaining, generated endemic labor scarcity, which in turn gave rise to a profusion of welfare capitalist benefits offered by firms to attract and retain labor. The employers’ confederation proved unsuccessful in unilaterally suppressing this resurgent segmentalism, and these difficulties help explain employer support for welfare state politics during the 1940s and 1950s.

This chapter returns to the analysis of twentieth century U.S. to explain the dual nature of its system of labor market governance in which cartelism, a centralized system of multiemployer collective bargaining, thrived alongside segmentalism in important sectors like bituminous coal mining, clothing, and building and construction. In these sectors, employers and unions joined in cross‐class alliance to prop up wages to stem destabilizing low‐standard competition. The regulatory alliance, distinct from Sweden's solidarism, which imposed ceilings instead of floors on wages, helped give rise to economic and political phenomena of an equally distinct nature, e.g., early ties between the Republican Party and the powerful miners’ union; corruption in building and construction (which was absent in Sweden); and ultimately, employer interests in the New Deal's labor and social legislation of the 1930s.

Wraps up the analysis of labor market developments in the U.S. through the 1940s showing how and why employers abdicated their segmentalist autonomy and submitted temporarily to state‐imposed solidarism, including intersectoral wage compression similar to what Sweden's normal peace time system brought about. During the prewar and interwar periods, the same employers actively sought another kind of intersectoral control, especially over wages in the building and construction trades, because high wages in this sector disrupted major manufacturers’ otherwise workable system of labor market governance just as they did in Sweden. Unlike in Sweden, however, major American manufacturers were unable to find allies for a cross‐class alliance against the building trade unions, and thus political relations between capital and labor remained far more hostile than in Sweden despite the Swedish labor movement's explicitly anticapitalist ideology.