Technological Change and Welfare State Reform

Project Information

WELTECH

Grant agreement ID: 101033625

DOI

10.3030/101033625

Project closed

EC signature date 28 April 2021

Start date 1 September 2022

End date 31 August 2024

Funded under

• EXCELLENT SCIENCE - Marie Skłodowska-Curie Actions

Total cost

€ 163 673,28

EU contribution

€ 163 673,28

Coordinated by

EUROPEAN UNIVERSITY INSTITUTE
Italy

Periodic Reporting for period 1 - WELTECH (Technological Change and Welfare State Reform)

Reporting period: 2022-09-01 to 2024-08-31

Summary of the context and overall objectives of the project

As societies transitioned from Fordist production regimes of the mid- to late 1900s to the knowledge economy from the 1990s and through the 2000s, technological change became an increasingly disruptive force for advanced capitalist democracies. With increased automation of jobs, workers faced more frequent career interruptions, shorter shelf life of skills, and larger-scale skill obsolescence. At the same time, inequality among workers increased as technological change predominantly affected those carrying out routine tasks, leading to a hollowing out of largely middle-class jobs. With the accelerated dissemination of generative artificial intelligence, it is as of yet unclear to what degree the disruptive effects of technological change will extend to workers carrying out more complex tasks. Welfare states, which have largely matured during the decades post-WW2, have become increasingly ill-equipped to deal with the challenges arising from technological changes. Originally, the prime focus of the welfare state was to redistribute resources both over the life course and from rich to poor, as well as to protect individuals from the effects of adverse life events such as ill health and unemployment. With new social risks arising from the challenges of technological change, this decommodification-approach gradually makes way for a more modern iteration of social policy. However, while the economic effects of technological change are well-researched, we still know relatively little about its effects on policy, and, in particular, how welfare states in the advanced democracies adapt to these new challenges. Likewise, we know little about what determines different adaptations politically. WELTECH seeks to answer these questions by carrying out novel empirical research, and developing a refined theoretical understanding of welfare states change in order to adapt to new economic challenges like technological change.

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

WELTECH carries out in-depth case studies of welfare state reforms with the aim of adapting to technological change in three European countries, Germany, Sweden, and the United Kingdom, as well as comparisons with other adanced democracies. It does so leveraging several theoretical frameworks in the comparative political economy literature. Each of the three cases falls into distinct categories of welfare regimes (continental, social democratic, and liberal) and growth models (export-led, balanced, and demand-led), thus allowing for different reform trajectories to be identified and their political determinants to be analysed based on the specificities of the cases’ welfare regimes and growth models. As a starting point, WELTECH traced major reform efforts between 2000 and 2020 based on national legislation and European database LABREF according to the social investment paradigm, which is used as a benchmark framework to understand future-oriented welfare state reforms. In a second step, the project provided an indicator of social investment reforms based on both qualitative and quantitative data. Third, the project distills the particular reform needs in each of the three cases based on their growth models and welfare regimes accounting for economic necessity and institutional path dependence. These are used to determine whether social investment reforms correlate with these needs in order to gauge whether observed differences across the cases are determined by factors relating to a country’s previous institutional configuration and growth model. As part of these in-depth case studies, additional qualitative evidence is used to determine the impact of particular groups including economic elites, bureaucrats, and policy makers. The most important findings are that (1) there have indeed been a number of slow yet transformative changes to welfare states aimed at mitigating the adverse effects from technological change such as skill obsolescence; (2) there is some convergence in the reform trajectories onto the social investment paradigm suggesting that social policy is no longer seen purely as a vehicle for redistribution and decommodification, but as a productive instrument that seeks to channel structural changes into higher levels of productivity and economic participation while increasing inclusion and tackling inequality; (3) differences across the case studies remain, and they go beyond institutional path dependence; (4) a country’s growth model crucially impacts welfare state reform trajectories; (5) policy makers, once elected, appear to undergo a Gestaltswitch forcing them to consider which reforms are best-suited to induce economic growth taking into account the country’s specific growth model; regardless of party colours, and, in fact, at times against party tradition, policy makers cater to the social bloc made up of workers and producer groups in the most important sectors.

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

The findings of the project show that transformative welfare state reforms, traditionally considered difficult in the comparative welfare state literature, especially with limited fiscal space, are not only possible but the norm. Further, welfare state reforms from 2000-2020 have been substantially aimed at mitigating the adverse effects of technological change. In many cases, the reform pressure induced by technological change has been used to implement policies that can be described as successful social investment, thus going beyond de-commodification and redistribution, and leading to social policy being viewed as an instrument that can increase economic productivity and inclusion. In theoretical terms, the project likewise challenges the state of the art by highlighting the importance of economic imperatives in determining reform trajectories. Policy makers are thus less constrained by previous rounds of (social) policy making, as historical institutionalism posits, than by their desire to successfully manage the economy as a whole. Furthermore, while much of political science has followed the electoral turn in the last ten years, the project underscores that immediate electoral considerations, party affiliation, or, indeed, public opinion matters less in determining reform trajectories than policy makers’ ideas about how the economy should be managed, which in turn is a function a country’s growth model and the needs of the social bloc. Beyond academia, the findings of the project highlight the increasing acceptance of the social investment paradigm among policy makers as a guiding framework for successful social and economic policy. By bridging the comparative welfare states and growth models literatures, the project contributes to bringing the social investment paradigm into the mainstream. In fact, a follow-up project to WELTECH on the basis of which specific policy recommendations will be developed has been funded by a German think tank and will commence subsequent to WELTECH.

Social investment multiplier (Hemerijck, Ronchi, and Plavgo 2023)