Why do voters accede to or abandon social democratic parties in the most recent decades? This chapter analyzes the reasons that motivate voters go choose among parties. Are spatial considerations coming into play, that is, do voters move to parties that are more consistent with their preferences than those they abandon? This chapter tests this argument with European Election Study data from 1999 to 2019 focusing on those respondents who report a different party preference at the time of a survey compared to their past vote recall (“vote switchers”). The data reveal a robust relationship between switching direction and voter preferences, bearing out rational spatial theories of voting. For Social Democrats’ strategy considerations, however, this brings to light an inconvenient fact: Voters abandon their parties for very different reasons heading to a plurality of alternatives. Consequently, no unified party strategy can stop the vote hemorrhage on all fronts of competition.

This chapter focuses on the electoral performance of social democratic parties in different institutional and competitive contexts. We explore three avenues to shed light on the relationship between social democratic parties’ strategic interaction with competitors and their respective electoral payoffs. We start from premises of spatial theories of party competition but hypothesize only behavioral relations between party choices and electoral outcomes, not strategic equilibrium configurations. We ask three questions: first, holding all other parties’ positions constant, do party positions closer to the center of a policy dimension – where empirically most voters are located – pay off in electoral terms and does this effect vary across relevant dimension of party competition? Second, does distance of parties from competitors improve their electoral fortunes? Taking spatial considerations of the first two questions together, are parties electorally better off if they place themselves closer to the center of policy spaces, while simultaneously facing only distant competitors? Third, what are the electoral consequences of two focal parties – a moderate left (social democratic) and a moderate right (conservative or Christian Democratic or People’s) party – simultaneously choosing positions in a multiparty field? These consequences may be different for the individual parties and for their ideological “field.” The performance of individual parties turns out to be much in line with spatial theory: When Social Democrats move to the center, they are likely to win voters from the center-right, but lose votes to green-left and radical-left parties within the left field. Social Democrats often perform stronger when they move left than to the center. But there is a crucial difference between their choices when it comes to considering the electoral performance of the entire set of left-field parties. By moving to the center, and shedding votes to their leftist competitors, Social Democrats sometimes effectively increase the size of the leftist field and thereby also boost their own bargaining power over coalition governments, as they are usually the most moderate party in the left field and most capable of crafting coalitions with parties of the center-right, particularly if Social Democrats control the median voter.

The relationship between social democratic parties and labor unions is of interest for the entire era of labor mobilization since the nineteenth century. The middle-class shift in the employment structure of West European countries, the emergence of second-dimension politics, and the pluralization and fragmentation of the “left field” raise several questions in this regard: Have the constituencies of left parties and trade unions developed in parallel or they diverged? Consequently, do the average preferences of trade union members and left voters align or diverge? Do unionized left voters sort increasingly into radical left, social democratic or green and left-libertarian parties?

In this chapter, we address the subject of union–party relations and how it relates to social democratic fortunes with microlevel data on membership, political preference profiles, and electoral behavior. We find that the bond between labor unionists and social democrats is anchored in a rather close similarity and convergence of policy preferences. This proximity of beliefs is not limited to questions of economic redistribution but also covers policy issues concerning societal governance and immigration. In many instances, unionists are – on average – more libertarian on questions pertaining to the dimension of societal governance and more inclusive and universalistic on questions of citizenship than nonunionized social democratic voters. In consequence, unionists are progressively less an uncontested electoral preserve of Social Democracy.

Chapter 7 is the conclusion. We provide a short and selective synopsis of our argument and briefly review, and elaborate on, the empirical illustrations from previous chapters. Theoretically, we suggest that cross-class solidarity, which has sometimes been linked to dense networks of civic associations, is likely to originate in low information and encompassing social insurance programs. The chapter also discusses promising avenues for future research.

Chapter 1 introduces the topic and motivates our study. It explains the general logic of our argument and introduces the methods and evidence we rely on. The chapter gives an overview of the book’s organization and main insights and hence serves as a preview.

Chapter 5 extends our framework to credit markets, which are not usually analyzed by scholars of the welfare state, yet fulfill many of the same income-smoothing functions. Much like in private insurance markets, more and better information allows for better risk classification, which enables lenders to tie interest rates more directly to default risk. This results in inequality because individuals with a higher risk of default are almost always lower income, and more information either raise their interest rates or cut them off from credit markets altogether. The welfare state matters, too, because generous social protection lowers default risk – something lenders take into account. Based on a data set containing the 39 million single-family loans that Freddie Mac purchased or guaranteed in the past two decades, we show that the interest rate spread markedly increased over time and we test, using a regression discontinuity design, whether information could have plausibly caused this increase. We also test whether social protection influences access to credit for different income groups and find that it does.

Chapter 4 chronicles the status quo and innovations in underwriting practices in the life insurance domain and shows how private markets deal with information problems and how they eagerly capitalize on novel ways – such as tracking devices – to mitigate asymmetric information. Using quantitative analysis, the chapter also shows that private life insurance markets are more developed in country-years with better information, but that partisanship mediates this relationship. Life insurance is an interesting domain to study because it has many parallels to health insurance, yet the former is mostly private, while the latter is mostly public. The chapter discusses the emergence of a supplementary private health insurance market, but it also documents the continued popularity of public solutions in areas where the time-inconsistency problem cannot be overcome by private actors.

Chapter 6 focuses on labor market developments and preferences for unemployment policies. Using data from Germany, we show that increasingly, labor market risks can be predicted with a small set of observables (education, occupation, and location), while the relevance of private information has declined over time. Polarization over unemployment policies has risen at the same time. We also explore – theoretically and empirically – how people translate their labor market situation into political preferences and show the importance of social networks in the process. Lastly, the chapter describes a case study of a fascinating reform in the Swedish unemployment insurance system, which shows what happens when unemployment insurance contributions and benefits are tied to unemployment risk, as would happen in a private market. Thus, the Swedish case provides a window into the (possible) future of segmented social policy programs that we predict will become more commonplace.

Chapter 3 offers a historical account of the emergence of the welfare state. In the absence of private or public insurance and faced with new, poorly understood, and existential risks, workers set up mutual aid societies (MASs) to cope with industrialization and urbanization. At their peak, MASs covered up to half of the (male) population but only protected against a small fraction of the risks of unemployment, disability, disease, old age, and death. While MASs tried to mitigate adverse selection and moral hazard through monitoring, they faced a double bind: they attracted bad risks while losing good risks to commercial insurance. Nor could they cope with correlated risks or support PAYG arrangements (the time-inconsistency problem). Ultimately, they were replaced by compulsory public social policy programs that mandated all citizens to join a common risk pool. The state had the power of compulsion, the ability to overcome the time-inconsistency problem, and majority support for social insurance in the absence of effective private alternatives. The result was a massively redistributive welfare state.