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Welfare-State Retrenchment Revisited: Entitlement Cuts, Public Sector Restructuring, and Inegalitarian Trends in Advanced Capitalist Societies

  • Richard Clayton (a1) and Jonas Pontusson (a1)

In recent years it has become commonplace for comparativists to emphasize the resilience of welfare states in advanced capitalist societies and the failure of neoliberal efforts to dismantle the welfare state. Challenging some tenets of the resilience thesis, this article seeks to broaden the discussion of welfare-state retrenchment. The authors argue that a sharp deceleration of social spending has occurred in most OECD countries since 1980, that welfare states have failed to offset the rise of market-generated inequality and insecurity, and that welfare programs have become less universalistic. They stress the distributive and political consequences of market-oriented reforms of the public sector.

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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 Garrett, Geoffrey, 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, Europeanization and the End ofScandinavian SocialDemocracy? (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).

2 Pierson (fn. 1,1996), 150.

3 E.g., Korpi, , The Democratic Class Struggle (London: Routledge and Kegan Paul, 1983).

4 Pierson (fn. 1,1996), 174.

5 Ibid., 171.

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). Esp-ing-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), 1011. As these figures refer to men only, the problem of factoring parttime 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 Social Policy (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 Blank, Rebecca, 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 Freeman, Richard and Katz, Lawrence, eds., Differences and Changes in Wage Structures (Chicago: University of Chicago Press, 1995).

16 The basic argument of this section is suggested by Sunesson, Sune et al. , “The Flight from Uni-versalism,” 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), 1011.

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 Ringqvist, Margareta, Om den offentliga sektorn (Stockholm: Fritzes, 1996), 111–13.

22 Cf. Stephens, Huber, and Ray (fn. 1).

23 Pierson (fn. 1,1994), 142–46.

24 Pierson (fn. 1,1996), 109.

25 Alber (fn. 1).

26 Edelman, Peter, “The Worst Thing Bill Clinton Has Done,” Atlantic Monthly (March 1997), 46.

27 Esping-Andersen (fn. 18), 16.

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 Palme, Joakim and Wennemo, Irene, 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).

29 Alber (fn. 1).

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, The OECD 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 Neoliberalism and the German Model: Swedish Capitalism in Transition,” in Crouch, Colin and Streeck, Wolfgang, eds., Political Economy of Modern Capitalism (London: Sage, 1997).

33 Cf. Schwartz, Herman, “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 Gustafsson, Lennart, “Administrative Reform and Public Management in Sweden and the United Kingdom,” Public Money and Management 9 (Summer 1989); and Premfors, Rune, “The ‘Swedish Model’ and Public Sector Reform,” West European Politics 14 (July 1991).

34 Ringqvist (fn. 21), 78.

35 Ibid., 106. Cf. Olsson, Sven, Social Policy and Welfare State in Sweden (Lund: Arkiv, 1993), chap. 4.

36 Colling, Trevor and Ferner, Anthony, “Privatization and Marketization,” in Edwards, Paul, ed., Industrial Relations (Oxford: Blackwell, 1995), 493.

37 David Winchester and Stephen Bach, “The State,” in Edwards (fn. 36), 311–14.

38 Economic, June 6,1992.

39 Central Statistical Office (London), Economic Trends, no. 495 (1995), 17.

40 See Wise, Lois, “Whither Solidarity? Transitions in Swedish Public-Sector Pay Policy,” British Journal of Industrial Relations 31 (March 1993); and Elliott, R. F. and Duffus, K., “What Has Been Happening to Pay in the Public Service Sector of the British Economy?” British Journal of Industrial Relations 34 (March 1996).

41 Cf. Pontusson (fn. 9); and Rueda and Pontusson (fn. 12).

42 McKie, David, The Guardian Political Almanac 94/95 (London: Fourth Estate, 1994).

43 Sunesson et al. (fn. 16), 25.

44 Esping-Andersen, “Welfare States without Work,” in Esping-Andersen (fn. 18).

45 Cf. Streeck, Wolfgang, “Neo-Voluntarism: A New European Social Policy Regime?” in Scharpf, Fritz, Schmitter, Philippe, and Streeck, Wolfgang, eds., Governance in the European Union (London: Sage, 1996).

46 Schwartz (fn. 33); and Swenson, , “Labor and the Limits of the Welfare State,” in Golden, Miriam and Pontusson, Jonas, eds., Bargaining/or Change (Ithaca, N.Y.: Cornell University Press, 1992).

47 National Statistical Office, New Earnings Survey (London, various editions).

48 Pierson (fn. 1,1994), 146–61.

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).

* 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.

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