Context, Research Problem, and Research Question

Historically, the postwar decades in much of Western Europe and the Anglo- Saxon democracies have been characterized as a period of unmatched prosperity. The rapid catch-up growth, particularly strong in Europe, facilitated the comprehensive socialization of life- and labor-related risks via social programs. Against the backdrop of the Cold War rivalry, this extension of social security systems can be regarded as an important legitimizing factor for an economic system that continuously generates inequality (capitalism) while at the same time operating under conditions of political equality (democracy). However, the “golden age” of industrial capitalism (Hobsbawm 1996: part 2), with double-digit growth rates and de facto full employment in many industrial democracies, ground to a sudden halt in the early 1970s. While the reasons for the flattening of the growth curve remain disputed, its consequences for contemporary welfare states and their material foundations are extensive. Sluggish growth in increasingly deindustrialized and tertiarized economies and a growing number of welfare recipients have contributed to a climate of “permanent austerity”; governments across the Organisation for Economic Co-operation and Development (OECD) face an enduring fiscal crisis, as public provision has expanded faster than the economy while the discretionary share of national budgets has decreased (Pierson 1994, 2001; Streeck and Mertens 2010). The end of the hitherto unmatched prosperity gains also marked the end of the “golden age” of the welfare state. Since the 1980s, the OECD states have undergone an observable reprivatization of labor market-related risks. This trend is particularly pronounced in the case of unemployment insurance programs, where eligibility rules have become increasingly restrictive and once generous income replacement has been curtailed substantially (see Allan and Scruggs 2004; 2006; Amable et al. 2006; Korpi and Palme 2003; Nelson 2010 for quantitative assessments, critical of this view: Pierson 1996).

These curtailments are of particular significance from a scientific, political, and societal perspective. The support for those persons unable to extract an income from the market marks the core of the postwar welfare state (Bonoli 2007: 495), and the configuration of unemployment insurance remains the central battlefield for the countervailing interests of capital and labor (Korpi and Palme 2003).