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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.

The chapter discusses three periods of policy change in the field of social protection for unemployed people. It explains basic parameters of unemployment protection systems, contrasting contemporary systems with those which existed in the late 1970s. Making use of several indicators, it assess the scale and profile of change in each country. The different reform profiles are identified and their genesis discussed in the context of major legislative changes. It argues that the specific links between unemployment protection systems and respective national political economy structures have impacted strongly on the emerging reform profiles. Dynamic power relations within and across government parties, as well as contextual changes impeded or facilitated policies, thus explaining cross-national variations in the pace and profile of reform.

This chapter turns to the social democratic reforms of the 1940s and 1950s, rooted in cross‐class alliances that were ultimately to distinguish Sweden as the world's paragon social democratic welfare state. Looking first at its People's Pension and universal health insurance reforms, it shows how the Social Democratic government assisted organized employers in their efforts against welfare capitalism by relieving pressure on individual firms to use private social benefits to attract and retain labor under the labor scarcity associated with solidarism and strong expansionary macroeconomic pressures. It then looks at Sweden's renowned “active labor market policy” and its controversial pension legislation of 1959 to show how additional social democratic reforms directly served employers’ solidaristic interests in wage restraint, labor mobility, and the rationing of labor made scarce by collectively administered underpricing – all the while preserving capitalist domination of the investment process.

This chapter is concerned with the labor market policies that governments in Austria, Denmark, the Netherlands, and Sweden pursued after the emergence of high unemployment. It attempts to explain why these countries followed different reform paths, and why political conflicts over labor market reform played out differently. In the 1990s and 2000s, Denmark and the Netherlands made a series of reforms in the areas of unemployment insurance and active labor market policy, introducing a model of labor market regulation that has become known as “flexicurity.” The chapter's main argument is that this was a result of two factors: the early onset of unemployment and the renegotiation of postwar political arrangements in Denmark and the Netherlands that began in the 1980s. Political circumstances and economic policy choices in the 1970s and 1980s continued to matter to labor market policymaking in the 1990s and 2000s.

This chapter has two main goals: to produce data that provide a complete picture of the preferences of insiders, outsiders, and upscale groups; and to test whether these preferences fit into the partisanship model proposed in this book. The chapter proceeds as follows. The first section provides a brief explanation of the survey used in the analysis and the way insiders, outsiders, and upscale groups have been categorized. The second section offers a detailed explanation of the individual preferences implied in the insider-outsider model and an initial and descriptive assessment of their accuracy. The third section contains a systematic multilevel analysis of the individual preferences of insiders, outsiders, and upscale groups. The fourth section introduces the two macro factors which, in Chapter 2, were hypothesized to affect the differences between insiders and outsiders: job security and corporatism. The final section presents multilevel maximum likelihood models estimating the effects of job security and corporatism. The results corroborate the model's claims: lower levels of employment protection do indeed make insiders more like outsiders (i.e., more supportive of labour market policy). The results support an economic insider-outsider interpretation of the effects of corporatism on insider preferences.

This chapter analyses how the interaction between government partisanship and unemployment vulnerability affect the politics of active labour market policies (ALMPs) in Spain, the Netherlands, and the UK. The analysis of the Spanish case shows that government partisanship does not affect ALMPs. Social democratic governments in Spain have not promoted higher levels of ALMPs compared with conservative ones. Developments in the Netherlands are remarkably similar to those in Spain. The analysis of the UK case shows a clear temporal division. During the 1970s and 1980s, government partisanship did not affect a general disinterest in ALMPs. Employers did not want them, unions had incentives not to pay too much attention to them, and Conservative and Labour governments had no reason to favour them. High levels of insider protection made the Labour Party indifferent to ALMPs until the arrival of Margaret Thatcher. The decrease in insider protection promoted by the conservative governments of Thatcher and Major facilitated a new interest in ALMPs by insiders and the emergence of Blair's Third Way (defined as a Labour strategy with employment promotion as a preeminent goal).

This chapter analyses the transformations in party strategies that result from new voter demands and political-economic conditions. It presents a model that attempts to put together two important but often unrelated literatures: one focusing on electoral competition and the other on comparative political economy institutions. It argues that comparing and identifying social democratic governments with low unemployment and conservative ones with low inflation is not productive. This identification is based on the assumption that labour is disproportionately affected by unemployment, which is inaccurate. It is shown that labour is divided into those with secure employment (insiders) and those without (outsiders) and that the electoral goals of social democratic parties are sometimes best served by pursuing policies that benefit insiders while ignoring the interests of outsiders.

Chapter 9 considers Denmark and Sweden, two countries that exemplify the universalistic welfare state. Denmark’s unemployment rate was similar to that of the United States in the 1980s, rose above it in the 1990s, but by 2002 was again well below it. Sweden’s unemployment rate was far below the U.S. rate until the early 1990s, and although unemployment shot up to almost 10% in the middle of the decade, by 2002 Sweden was again outperforming the United States. This impressive employment performance has been achieved without changing the fundamentals of the Scandinavian Model: high tax rates, a comprehensive social security system, and among the lowest levels of wage and income inequality in the developed world. The authors argue that much of the explanation can be found in a strong commitment of both countries to active labor market policies, such as job placement and work-related education and training programs. Danish and Swedish government interventions have acted to facilitate both labor market flexibility and the transition to the “new economy” of services and high technology. These state policies have helped promote a flexible and innovative “high-road” economy without abandoning the universalistic welfare state.

The previous chapters have shown that in the presence of insider-outsider conflict, social democratic governments will promote insider policies regardless of the consequences for outsiders. However, it has also been argued that there are factors that make the interests of insiders more similar to those of outsiders, i.e., employment protection and corporatism. This chapter tests whether the relationship between government partisanship and policy is affected by these factors. It begins by analysing the dependent variables and their relationship to this book's hypotheses. It then introduces the explanatory variables. Finally, it briefly explores some methodological issues relevant to the statistical analysis, presents the results, and relates them to the model developed in previous chapters.

Looks at some of the labour market outcomes of recent economic reforms. The extent to which labour market institutions affect the relationship between reform policies and income inequality remains controversial. Some see labour market institutions as a hindrance to more efficient development and growth, while others argue that without proper labour market institutions an economy cannot progress. Labour market policies, regulations, and institutions have at least three goals: improving allocative efficiency (matching supply and demand); improving dynamic efficiency (increasing the quality of the labour force); and improving or maintaining a sense of equity and social justice among labour force participants. These different goals inform the discussion throughout the chapter, which is organized as follows: after an introduction, the second section touches briefly on some theoretical aspects of labour markets and reform policies; the third reviews trends in labour market changes in terms of informalization of employment, wage shares in national income, and wage inequality; the fourth reviews some general trends in labour market policies that have typically been implemented under the Washington Consensus, namely, a decline in minimum wages, shifts in the bargaining power of unions, and a reduction in employment protection; the final section offers conclusions on whether or not labour market policies reduce income inequality.

Chapter 6 deals with the labor market policy of the OECD and compares its Jobs Study from 1994 with the re‐assessed Jobs Strategy of 2006. The initial Jobs Study recommended a single policy package which was based on a deregulation framework in many respects. The re‐assessed strategy, in contrast, recognizes two equally legitimate paths: the liberal Anglo‐Saxon path and the Social‐Democratic Nordic path. The framework of one‐size‐fits‐all has been abandoned, and it is emphasized that countries make different political choices based on values that need to be taken into account when designing policy reform. The policy message has undergone considerable changes – yet, in both cases, the OECD has argued that its policy recommendations are evidence‐based. Why have such different conclusions been reached? In order to understand the policy course changes the chapter considers both organizational relationships within the OECD and its relationship to its surrounding world. It argues, inter alia, that the ‘expert organization’ has become more pragmatic, increasingly taking into account the countries' abilities and willingness to implement recommendations.

This chapter focuses on those employment measures commonly known as active labour market policies (ALMPs). It starts by providing a comparative historical analysis of ALMPs, suggesting that these measures effectively date back to the early 20th century. However, in recent years their content has been altered to encompass a higher proportion of supply-side measures, typically accompanied by more stringent qualifying criteria for the receipt of unemployment benefits. ALMPs have now become an effective mechanism for the control of the labour market. In light of these trends, the chapter questions the compatibility of some of the current forms of ALMPs with some notions of ‘right to work’ underpinned by human rights and decent work concerns.

This chapter addresses two closely woven issues: that of harmonizing (making compatible) the dual aims of careers and motherhood that most European women now pursue; and that of achieving full gender neutrality (equality) in the allocation of opportunities, life chances, and welfare outcomes. The main aspects addressed in investigating the multi‐dimensional compatibility problem are: the heterogeneity of women's preference sets (family centred, career centred, or dual role), public support for working mothers, the job supply, the role of wages, and motherhood. The main aspects addressed in investigating gender equality across the life course are: gender segregation in the labour markets, gender differences in pay, female life choices, and the extra costs and risks of employing women. It is argued that neither social nor labour‐market policy will solve these gender inequality issues, and the possibility of a domestic solution is discussed.

This chapter presents a summary of the book's main findings and offers some final thoughts. It shows that insider-outsider politics have become an important part of any adequate account of social democracy since the 1970s. In the presence of insider-outsider conflicts, there exists a strong temptation for social democratic governments to promote less than egalitarian policies.

The chapter provides an account of the changing role played by active labour market policies (ALMPs) in Europe since the post-war years. Focusing on six countries (Sweden, Denmark, France, Germany, Italy, and the United Kingdom), it shows that the role of ALMPs is related to the broad economic situation. At times of rapid expansion and labour shortage, like the 1950s and 1960s, their key objective was to upskill the workforce. After the oil shocks of the 1970s, the raison d’être of ALMPs shifted from economic to social policy, and since the mid-1990s, we see the development of a new function, well captured by the notion of activation, which refers to the strengthening of work incentives and the removal of obstacles to employment, mostly for low-skilled people. The adequacy between economic context and policy is not always optimal, though. Like other ones, this policy domain suffers from inertia, with the result that the countries that have led the way in one period have more difficulty adapting to the economic conditions prevailing in the following one.

Austria's fundamental political transformation from an economically backward and multi-ethnic superpower to a small and wealthy democracy at the centre of Europe involved phases of democratic (1918–34), pre-fascist (1934–8), and Nazi rule (1938–45). Despite several regime breakdowns during the first half of the 20th century, the welfare state established in the Habsburg era survived political upheavals by and large unscathed. Post-war Austria, by contrast, was characterized by a considerable economic, societal, and political stability between the 1950s and the mid-1980s. In retrospect, a duopoly of pro-welfare state parties, consociational democracy, and highly developed corporatism, as well as a Federal Constitution lacking institutional veto points, provided a political configuration highly conducive to welfare state expansion during the post-war period. Rapid economic growth provided the economic means for funding the expansion of the welfare state and smoothed distributional conflict between the social partners and their allied parties.

According to the efficiency hypothesis, the high-spending, high-tax welfare state in Denmark should be under considerable strain in the era of globalization and socio-economic modernization. Indeed, the Danish welfare state has seen a lot of changes in the last three decades. Most of these changes, however, have not been in line with the expectations of the efficiency thesis. The universal and generous nature of the system has largely been preserved. Furthermore, Denmark has been able to overcome a major socio-economic crisis without relinquishing its commitment to the Scandinavian welfare model. The current cyclical crisis stems from a huge decline in exports. As a consequence, unemployment escalated in the first half of 2009. However, because of its previously excellent labour market performance, Denmark still has one of the lowest unemployment rates in the European Union. This chapter examines welfare state changes in Denmark in four policy sectors in the years from 1973 onwards.