Introduction

Globalisation presents a dilemma for governments in how to best balance participation in international economic systems and the protection of their national citizens and interests. These tensions between global economic processes and supporting the well-being of citizens also mean that there is great room for variation in approaches adopted by governments to support their labour markets and citizens. This variation is illuminated in political-economic debates related to the varieties of capitalism (Esping-Andersen 1990; Hall & Soskice 2001; Schmidt 2002), centred around the existing models of welfare states and welfare capitalism. This has further led to discussions of how countries can be competitive despite high levels of regulation and costly systems of social protection. These tensions are further demonstrated by debates surrounding government responses to the current economic crisis, starting around 2008, with support for protectionist measures on the rise in many countries (see Melik 2009).

The growth of the knowledge economy, as seen in high-tech industries such as IT, software and skilled service jobs, has offered new economic opportunities, particularly since the 1990s. Within the European Union, the Lisbon Strategy launched in 2000 set as one of the top priorities for Europe to become the ‘world's most competitive knowledge-based economy’ by 2010. In order to maintain prosperity, new economic sectors should be developed and research and development (R&D) spending increased to 3 per cent of GDP across all EU member states. However, there are also numerous challenges. The specific areas of growth and employment can be hard to predict, as the technology and demand involved changes quickly, the political economic environment varies from place to place, and competition to build knowledge-based industries is international. Additionally, recent years have seen an increase of outsourcing to firms in countries with lower labour costs, including on R&D and other functions that are considered part of the knowledge economy for which advanced economies in Western countries were assumed to have a clear competitive advantage.

Since the late 1990s, immigration has also become associated with the growth and development of the knowledge economy, to fill high-skilled labour shortages and as a way to gain the ‘best’ employees, largely drawing from analyses done on the IT sector in the United States.