Why do social democrats choose neoliberal labor market policies? Since social democrats are typically punished for welfare state retrenchment and because these policies do not equate well with social democratic egalitarian principles, it is difficult to see what they gain from it. We argue that, depending on the intra-party balance of power between activists and leaders, some parties are office-seeking, whereas others are policy-seeking. This behavioral difference explains why some parties are responsive to environmental incentives such as the economy and public opinion (office-seeking parties) and others are responsive to policy-motivated activists (policy-seeking parties). Using three case studies of social democratic parties (Germany, the Netherlands and Spain) in the period 1980–2010, we analyze when and why these parties introduced neoliberal reforms. The study shows that office-seeking parties introduce neoliberal measures if the risk of losing votes due to an underperforming economy becomes larger than the risk of losing votes due to the mobilization of unions and opposition parties. Policy-seeking social democrats retain a social democratic ideology, unless prolonged failure to win office empowers pragmatic leaders to push through office-seeking strategies.