How policies shape politics:

Transcription

1 Paper prepared for the ECPR General Conference, 3-6 September 2014 in Glasgow Panel The Politics of Welfare and Social Policy Reform How policies shape politics: Labor market policy conflicts and coalitions in five western European countries Abstract This article contributes to the scholarly debate on how new social needs are politicized at the elite level. I am able to demonstrate empirically that the labor market policy conflict is two-dimensional. The findings of an analysis of five Western European countries indicate that depending on the labor market legacies, political actors fight not only over the degree of generosity and state intervention, but also over the nature and the extent to which specific activation policies should be promoted. I show that different regimes employ different types of activation strategies to recommodify the unemployed and that this affects labor market politics. Moreover, I address the unresolved question of whether social democrats represent the labor market insiders or outsiders. I show that their strategies differ depending on the regime s legacies and that they represent the insiders in dualized countries (Germany, France and Italy) and the outsiders in flexicurity countries (Denmark and Switzerland). Flavia Fossati Political Science Department Swiss Politics and Comparative Political Economy University Zurich Affolternstrasse 56 CH-8050 Zurich Phone: +41 (0) fossati@pw.uzh.ch Acknowledgments: I would like to thank Silja Häusermann, Hanspeter Kriesi, Dominic Höglinger and Evelyne Hübscher for valuable feedback on previous versions of this paper. I also thank the participants of the panel Political Representation and actors' strategies at The Swiss Political Science Conference in Berne, February 2014 and the participants of the panel The Changing Politics of Social Policy at the XVIII ISA World Congress of Sociology in Yokohama, July I am grateful for the support by the Swiss National Science Foundation, Pro-Doc Grant Grant Number PDFMP

2 Introduction In Europe, over the last few austere decades, we have witnessed an activation turn. Thereby welfare states have been transformed from (passive) securing arrangements to schemes which actively promote labor market participation. This goal has been reached by introducing policies such as retraining schemes, counseling, job creation programs, limits on benfits recipiency and increasing benefit conditionality (Bonoli 2010; Bonoli & Natali, 2012; Torfing, 1999; Gilbert, 2002). Whilst reforms introducing active labor market policies (ALMP) have been studied in detail, mostly in the form of case studies analysis (Bonoli and Natali 2012; Clasen and Clegg 2011), the question of how these reforms affect the politics of labor market policy has not been systematically addressed. In this article I aim to complement the literature on the multidimensionality of post-industrial reforms by investigating which issues are controversial among political actors and thus determine the labor market conflict. Then, I consider the other side of the coin, and analyze which actors coalesce and how these patterns differ depending on the labor market policy legacies. The first contribution of this article is to show empirically that the decision-making process in the domain of labor market policy no longer revolves merely around distributive issues along the lines of the labor/capital conflict, but that it increasingly includes questions about the nature of the activation policies (Bonoli and Natali 2012; Clasen and Clegg 2011). This is the case because in an era of austerity most European countries have implemented ALMP reforms inspired by the guidelines proposed by several supra- and international organizations (Ferrera & Gualmini, 2004; Graziano, 2007) to avoid addressing the skyrocketing unemployment rates using purely expansive social policies. I argue that the countries pre-existing institutional design, however, predefines the implementability and compatibility of particular ALMP policies with the labor market regime. Thus, the very interplay of labor market 1

3 legacies and new policy strategies gives rise to the variety of activation policies which ranges from the Nordic best-practice models to the less efficacious south-european versions, which neglect re-training and human-capital development. Whilst previous studies have claimed, mainly in theoretical terms, that activation policies differ significantly across countries, I am actually able to show empirically that activation policies in five Western European countries differ, and either focus on occupational activation strategies or on human-capital investment depending on the countries labor market legacies (cf. Torfing, 1999; Barbier & Ludwig-Mayerhofer, 2004; Barbier & Fargion, 2004; Bonoli, 2010; Daguerre, 2007). Second, I propose an institutionalist argument to explain how regime-specific activation conflicts come about and how these shape the political actor s coalition patterns. In more detail, I argue that it is precisely the existence of different institutional legacies which influences the nature of the activation conflicts in different labor market regimes. In a country where, for instance, training policies are already firmly established, the political conflict is likely to revolve around policies that are not yet implemented, such as the introduction of public job schemes or unemployment benefit reductions. Hence, those measures which differ from the countries standard policy repertoire are the ones which are most likely to be controversial, and by consequence structure the politics of labor market policy 1. Conversely, the regime-specific policy repertoire is taken for granted - as far as it works - and hence is less subject to political controversies. Finally, I apply this framework to explain the allegedly puzzling diversity of the social democrats strategy when it comes to representing either labor market insiders or outsiders (Rueda 2007; Schwander 2013). I solve this apparent contradiction by arguing that actors who belong to the same group or party family are likely to differ with respect to the measures they propose depending on the 1 In my understanding controversy is the clearest indicator of political conflict. 2

4 institutional context. For instance, in a country where unemployment policies are reasonably generous and hence cover the needs of the labor market insiders, social democrats may no longer focus on representing these interests but rather concentrate on policies targeting the new social risks and thereby expand their electorate. Conversely, if welfare provision for insiders is marginal, social democratic parties are likely to support the interests of their traditional core-electorate and hence focus on insider policies before turning to new challenges. Thus, the variation in labor market policy context explains why the scholarly literature proposes contradictory expectations with respect to the strategy of social democratic parties (Rueda, 2007; Schwander, 2013). In a nutshell, I argue that policy shapes politics (Lowi, 1972) and that, by consequence, institutional settings shape the nature of the political conflict and of coalition patterns. I develop these arguments as follows: In the theoretical section, I elucidate why the labor market policy conflict has become two-dimensional, and apart from a state-market 2 conflict also involves a conflict over activating strategies. In a second step, I theorize and develop predictions about the coalitions in this policy domain. In the empirical section, by means of factor analyses, I show that the labor market conflict is indeed characterized by two dimensions. According to the hypotheses, I find that the traditional state/market conflict is complemented by a regime-specific activation dimension. Then, I describe the political actors positions in the two-dimensional policy space and discuss the coalition patterns. In the final part of the article, I analyze the strategy of social democrats in particular, to assess whether they represent the insiders (Rueda, 2007), whether they instead focus on the outsiders, or whether they represent both (Schwander, 2013). The last section summarizes the findings and explores venues for further research. 2 Here I use economic and state/market conflict synonymously. 3

5 Theory The conflict in labor market policy: economic and activation dimensions The political conflict shaping the party system, and by consequence also social policy, is traditionally represented as a labor-capital antagonism. This antagonism has an impact on the level of generosity and universality of passive benefits, as well as the role and degree of state intervention (Esping-Anderson, 1990; Kitschelt, 1994; Korpi 1983; Lipset & Rokkan, 1985 [1967]). This basic political conflict can be synthesized in the form of an axis with one side in opposition to state-interventionism and the other opposed to market-oriented policies. With regards to social and labor market policies, left policy positions - which were proposed mainly by social-democratic parties and unions - promote generous passive benefits. These aim to reduce social inequality by insuring blue-collar workers against traditional industrial risks (Esping-Anderson, 1990). Conversely, political actors on the right propose market-liberal solutions to reduce state intervention and constrain universalistic and redistributive welfare state spending. Even though this conflict still structures labor market policy, it is no longer able to fully capture the preferences and hence the nature of political contention in a post-industrial setting. In fact, the changes that have occurred in the occupational structure as a consequence of post-industrialization and social modernization have led to a differentiation of political preferences (Oesch, 2006; Kriesi, 1998; Rueda, 2007; Bonoli, 2005; Taylor-Gooby, 2005). Generous unemployment or pension insurance systems are credited foremost to the decreasing share of workers in standard employment relations, but they represent a suboptimal protection for the increasing share of unemployed and atypical workers (Bonoli, 2005; Berton, Richiardi & Sacchi, 2009). 4

6 The adverse economic conditions preclude the possibility of meeting new social risks, particularly the rising structural unemployment rates, by simply increasing the decommodification efforts. Thus, most reforms rely on social investment strategies (Morel, Palier & Palmer, 2012) and more specifically on activation policies. Examples are numerous and include the third-way programs (New Deals) under Labour in the UK (1997) (King & Wickham-Jones, 1999), the recently introduced Universal Credit (DWP, 2010; Smith, 2010) or the Hartz IV legislation in Germany (Fleckenstein, 2008). Overall, these activation reforms are institutionalized to cushion the impact of the advancing liberalization of labor markets by effectively reducing welfare state dependence and contemporaneously lowering expenditures (Giddens, 2000; Jensen, 2012; Morel, Palier & Palmer, 2012). The implication is that welfare states have been transformed from securing to enabling institutions (Bonoli & Natali, 2012: 1 4; Taylor-Gooby, 2005; Torfing, 1999). By consequence, labor market politics which once consisted of a one-dimensional conflict about the generosity and universality of passive benefits, have evoloved to a two-dimensional structure that includes an activation dimension (cf. Author 2013; Author & Colleague, forthcoming). Eventually, the conflict over activation policies aims at negotiating whether the country-specific challenges should be addressed by means of human-capital, occupational or liberal activation policies (Barbier & Ludwig-Mayerhofer, 2004; Bonoli, 2010; Daguerre, 2007). Thus, the nature of the activation conflict can be expected to vary depending on the labor market policy legacies. To test the argument whether the labor market conflict is indeed two-dimensional and whether its conflict depends on the institutional legacies of societies, I analyze five Coordinated Market Economies (CMEs) - Denmark, Germany, France, Italy and Switzerland that differ mainly with respect to their activation models (most similar system design). 5

7 CME countries are characterized by strong horizontal coordination mechanisms and by unemployment insurance systems that incentivize the investment in specialized skills (Hall & Soskice, 2001; Estevez-Abe, Iversen & Soskice, 2001). Whilst the Variety of Capitalism (VoC) provides a good explanation for institutional equilibria, it is less helpful in tracing reform trajectories within a particular regime. The capability to assess change however is essential when studying political conflicts because reforms provide insights into the issues which become controversial in different activation regimes. At the heart of the present case selection lies Thelen s theory (2012) which proposes a framework that enables researchers to distinguish between different strategies CMEs use to adapt their labor market policies to liberalization pressures. The author distinguishes between countries which introduced reforms leading two-tier labor markets and reforms focusing more on preserving social equality. In the first case, labor market reforms retained the high level of labor market insider protection (employment protection legislation) and contemporaneously allowed the market forces to operate freely in particular segments of the economy. This dualisation of employment conditions leads to labor market flexibilization at the margins and to increasing social inequality (Palier, 2012; Emmenegger et al., 2012; Palier & Thelen, 2010). These inequalities, however, were not balanced by the comprehensive introduction of activating policies as was the case in the Nordic CMEs. The countries following this second liberalization route have in fact been able to cushion the effect of market-friendly policy reforms with social programs that accommodate the demands of new social risk groups. Thereby, human-capital activation policies have become the centerpiece of a strategy which successfully balances re-commodifying and de-commodifying policies (cf. Rueda, 2007; Martin & Swank, 2012; Thelen, 2012). Following this distinction, I allocate Denmark and Switzerland to the flexicurity model and France, Germany and Italy to the dualizing model. 6

8 The legitimacy of this grouping is corroborated by Figure 1 which shows that flexicurity countries have a high level of passive spending, a very flexible labor market (low employment protection) and a low level of problem pressure (total number of unemployed individuals). Conversely, a distinctive feature of dualizing countries is their extremely high levels of employment protection legislation for the primary labor market, whereas labor market outsiders suffer from precarious employment conditions (Berton, Richiardi & Sacchi, 2009; Palier & Thelen, 2010; Palier, 2010 Emmenegger et al., 2012). Moreover, even though these countries spend as much on passive policies as a whole (as indicated by the size of the circles), the level of problem pressure is conspicuously higher than in the flexicurity countries and hence results in a comparatively smaller amount of spending per unemployed individual. Figure 1: Employment protection legislation, government expenditure for passive labor market policies and problem pressure 7

9 Aside from the flexibility of their labor market regulation, the level of problem pressure and the generosity of passive benefits, these regimes differ with respect to the nature of their activation policies (Barbier & Ludwig-Mayerhofer, 2004; Barbier & Fargion, 2004; Daguerre, 2007). Whilst the Nordic activation measures concentrate on enhancing the human-capital of the unemployed, the liberal variant is characterized by so-called work-first measures 3 and the continental solution is based on an occupational strategy. Bonoli ( ) summarizes these differences by means of a typology that captures the degree of human-capital and pro-market orientation. Similarly to Barbier and Ludwig-Mayerhofer (2004), he argues that in the Anglo-Saxon countries 5, the focus was laid on reinforcing coercion so as to prevent welfare state dependency. Contemporaneously, these liberal countries keep human-capital investment rather low. In the Nordic countries the activation policies are instead in line with the social investment framework which relies on up-skilling and employment assistance (cf. Jensen, 2012). Finally, the continental welfare states have a tradition of occupational ALMPs which aim at keeping the unemployed occupied mainly by short-time work while failing to systematically invest in their skills. Hence, these measures focus primarily on retaining the unemployed s social networks (cf. Barbier & Fargion, 2004; Daguerre, 2007). In a nutshell the characteristics of ALMPs differ fundamentally depending on the labor market regime a country belongs to. 3 Work-first measures stress the need to swiftly re-introduce workers into the labor market principally by means of (negative) incentives. 4 Bonoli (2010) proposes four ideal-typical ALMPs. The first is the occupational, which comprehends policies such as the creation of public jobs and which is characterized by a low pro-market employment orientation and weak level of human capital investment. The other three categories share a high pro-market orientation but diverge in terms of human capital investment. First, there are schemes fostering the swift reintroduction of the unemployed into the labor market by means of incentives but without investing in their skills (cf. time limits on recipiency, benefit reductions and conditionality). Second, there are measures with a medium level of human capital investment, which assist the unemployed in looking for a job (counselling, job search programs or job subsidies). Finally, there are up-skilling policies with a high pro-market orientation and a high degree of human capital investment (job-related vocational training). 5 According to the Varieties of Capitalism (VoC) the Anglo-Saxon countries correspond to the Liberal Market Economies (LMEs). 8

10 Obviously, each regime is characterized by a particular mix of policies. Since these inherently belong to the country s activation strategy repertoire these are less controversial than measures which are alien to the system. Hence, the expectation is that controversial policies determine the labor market policy conflict. Drawing on the theory presented above, I hypothesize that the labor market policy conflict is structured by a state/market and an activation conflict in all countries (H1). Moreover, I hypothesize that the activation conflict in the different regimes is determined by those policies which are controversial. The dualizing regime is characterized mainly by short-time work schemes but lacks up-skilling and (coercive) reintegration measures. Instead, the flexicurity countries have well-established training and incentive schemes, whilst short-time measures are rarely implemented (especially in Denmark). Accordingly, I expect that short-time work in Italy, France and Germany is uncontroversial and hence does not determine the labor market policy conflict in these countries, whereas this is the case for training and incentive-based reintegration measures in Denmark and Switzerland (H2). Actor constellations in the labor market policy space Regime-specific differences in activation conflict are, in turn, likely to determine different actor preferences and coalition dynamics. Thus, I expect that the actual preferences of actors belonging to the same party or actor family diverge depending on labor market policy legacies. For instance, it is dysfunctional for social democratic parties to advocate increasing passive benefits in countries where the replacement rates are already generous. Similarly, it is not conductive for liberal parties to insist on liberalizing measures where employment regulations are already flexible. 9

11 In the following, I derive hypotheses on the regime specific coalition patterns. Thereby, I concentrate on the most influential actors in the decision-making process, i.e. parties, unions, employers associations, state bodies and social movement organizations (SMOs) 6. As shown in Table 1, depending on the legacies, similar political actors display different economic and activation preferences. Particularly, social democrats can be expected to be located either in the traditional left or the third way coalition depending on whether one considers the flexicurity or the dualizing regime. Table 1: Expected coalition composition in flexicurity and dualized labor markets Economic dimension Activation State Market dimension Pro activation MODERN LEFT THIRD WAY Flexicurity Dualizing - greens - communists - white collar unions - social movement organizations - social democrats - state bodies - administration - research institutes - progressive liberals and right-wing parties Against activation TRADITIONAL LEFT TRADITIONAL RIGHT Flexicurity Dualizing - state bodies - administration - research institutes - progressive liberals and right-wing parties - blue collar unions - social democrats - blue collar unions - employers associations - conservative government parties 6 See Table 6 and 7 for a list of the actors which were included in the analyses. 10

12 In the first quadrant (Table 1) I expect the modern left coalition which represents individuals with preferences for generous passive and active labor market policies. Modern left actors foremost represent sociocultural specialists, i.e. individuals with left-libertarian values, and labor market outsiders (Kitschelt, 1994). Sociocultural specialists can be expected to endorse this policy strategy because of their professional socialization. In fact, working in occupations characterized by interpersonal work-logic (Oesch, 2006; Kriesi, 1998) sensitizes them to the needs of the unemployed and hence consolidates their preferences for generous state intervention. At the same time, these above-average educated individuals 7 recognize that in a knowledge society the demand for skilled workers is the biggest obstacle for the unemployed to be re-employed. A problem that can be best addressed by re-training measures linked to adequate passive benefits. In theory all left-oriented political actors could be expected to favor such extensive welfare state engagement. However, in the light of constraints due to fiscal and budget austerity, not all left actors may be in a position to pursue this kind of strategy. I expect foremost green parties, social movement organizations, white-collar unions and left opposition parties (e.g. communists) to advocate modern left policy packages because they are not in government and hence do not have budget responsibility. Conversely, I do not expect social democratic parties to belong to this coalition because as mainstream parties they compete for government responsibility. Thus, they are likely to refrain from proposing to increase activation effort for new risk groups without making cuts in other social policy areas. Hence, particularly in times of economic crisis, social democrats face the choice between accommodating the new or the old social risks, whilst keeping the status quo for the other group. In the bottom left quadrant I locate the traditional left coalition. This coalition focuses above all on passive benefits and job-security regulations. Since overwhelmingly labor market insiders benefit from 7 These left-libertarian individuals have been shown to be particularly likely to vote for social democratic and green parties (Kitschelt 1994; Kriesi 1998; Geering and Häusermann 2013). 11

13 such policy schemes, I expect this strategy to be adopted mainly by blue-collar unions and social democratic parties who represent the insiders (Rueda, 2007). The incentives to foster their core electorate s interests are clearly higher in countries where they are still affected by suboptimal protection and are well organized. Thus, social democratic parties in dualized countries should refrain from diversifying their policy offer to accommodate new social risks 8, and focus on traditional left strategies instead. On the contrary, I expect social democrats to propose third-way policies in regimes where traditional social risks, i.e. the insiders interests, are already accommodated. In such regimes social democrats are in a position to address new social needs by proposing activation measures and, where necessary, even reallocate resources from traditional to new risk schemes. Accordingly, in flexicurity countries where the insiders are well protected and do not fear (massive) cuts, both insiders and outsiders should have similarly strong preferences for increasing the activation effort (Emmenegger, 2009) whilst maintaining the status quo on passive benefits. Although in these countries activation offers are not essential for insiders, these are nonetheless a backup in case of need. Thus, it is not surprising that in flexicurity countries social democratic parties do not exclusively target labor market insiders in electoral campaigns (Schwander, 2013). The third-way coalition located in the top right quadrant favors increasing activation effort combined with an above-average market orientation. Besides social democrats (in the flexicurity regimes), government authorities, public administrations and progressive liberal or right-wing parties are likely to endorse this policy package. In fact, these actors are the most likely to be influenced by the supranational consensus, which combines the neoliberal insistence on balancing the budget with the idea that a quick provision of labor market access is essential for reducing unemployment levels 8 These above all are particularly hard to mobilize since these groups are extremely heterogeneous (Bonoli 2005). 12

14 (Daguerre & Taylor-Gooby, 2004; Stiller & van Gerven, 2012). Furthermore, it is plausible to assume that highly skilled workers, who are less likely to become unemployed, and individuals employed in technical jobs 9 prefer a less costly welfare state, and hence from a rational-choice perspective endorse reductions in welfare spending and increasing re-commodification effort (Oesch, 2006). Finally, in the traditional right coalition (bottom right quadrant) I expect to find primarily employers organizations and conservative/right-wing mainstream parties. These actors consider the current level of welfare support to be high enough and thus give priority to budgetary rigor over any kind of welfare expansion (Esping-Anderson, 1990). As argued by Huber and Stephens (2001), particularly right-wing/conservative parties are characterized by preferences for subsidiarity and self-reliance, and hence can be expected to dismiss not only an expansion of passive but also of active welfare effort (cf. Miles & Quadagno, 2002). Operationalization and methods To analyze the implications of the activation turn on labor market politics I rely on novel interview data which was collected in Denmark, France, Germany, Italy, UK and Switzerland in autumn The dataset is based upon semi-structured telephone interviews with the major policy-makers10 who are active in the domain of labor market policy, i.e. parties, unions, state bodies, administrations and social 9 These jobs do not follow a pro-social or client centered work logic and hence entail more conservative and market-friendly attitudes as compared to the sociocultural specialists. 10 Our NCCR-Democracy P11 research team originally contacted 161 political actors in the six countries. In the present analysis I rely exclusively on the data collected in the first of the two interview rounds of our elite surveys. In total we were able to obtain 109 interviews in October 2010 (first round) and 118 in December 2010 (second round) (please refer to Table 5 in the appendix for the response rate). We encountered severe difficulties in obtaining interviews in Italy and the UK. In particular, we were able to reach just one employers organization in Italy (even though the most relevant one) and had no opportunity to speak to a representative of the administration in the UK. In contrast, in Switzerland and in Germany the political actors were very cooperative and we faced no problems in scheduling interviews at all. Finally, in Denmark and France we encountered problems in particular with representatives of public administration, right-wing parties and employer s associations. 13

15 movement organizations (SMOs).11 This kind of interview data is best suited to analyse the political conflict structure because it allows assessing the underlying preferences of political actors independently of possibly idiosyncratic, very specific and/or limited political reform processes (cf. Häusermann 2010). Moreover, the precision of the questions we proposed to our interview partners allows for a more accurate analysis of the conflict dimensionality as compared to data which relies on very broad categories such as the Manifesto Data Collection (Manifesto Project MRG/CMP/MARPOR). Furthermore, I was interested in measures which are able to capture both the political actors preferences with respect to policy measures (position measure) and their perception of the relative importance of a particular policy measure (salience measure). Accordinlgy, Manifesto Data would be inadequate because they provide merely measures of salience rather than of position. Due to the shortcomings of the commonly used datasources we hence engaged in the collection of a more direct and precise measure of position and salience. I rely on several items of our questionnaire to operationalise the labor market policy conflict structure. In more detail, only those items were included which are theoretically best suited to capture the economic dimension (state/market) and the different activation models (Nordic and occupational). I also was careful to choose those items which best allow a discrimination between the different actors positions, i.e. which have the largest possible variance. 12 Nine preference measures meet these requirements (cf. Table 8). In detail, I operationalise the economic conflict by means of three indicators capturing the generosity of passive benefits and the degree to which the state engages in regulating social policy. The first item refers to the creation of 11 Interview partners were chosen as representatives of the major decision-making organizations who are experts in the field of unemployment policy within the specific organizations. The relevance of the organizations included in the analyses was cross-checked with two experts per country and validated by means of media analyses (see Kriesi et al. 2014). 12 I hence excluded items which were too generally formulated to capture specific labor market preferences ( social inequality should be reduced ) or uncontested items ( solidarity with the unemployed should be increased ) and which accordingly do not represent a political conflict ( see Tables 9 and 10 in the appendix for descriptive statistics). 14

16 public jobs. 13 Especially in southern welfare states, the expansion of public employment is a way of preventing unemployment and is associated with a generous leftist assistance to the unemployed. The second corresponds to a state-led intervention to guarantee decent living standards to workers (raising the minimum wage). To operationalise the market orientation of the generosity conflict, I rely on an item capturing preferences for unemployment benefit retrenchment and one aiming at increasing sanctions when an unemployed person refuses a job which is deemed appropriate. This second item captures a slightly different form of generosity since non-compliance with activation requirements is sanctioned by monetary disincentives such as freezing or reducing cash transfers (Clasen& Clegg, 2011; Kemmerling & Bruttel, 2006; Trickey & Walker, 2001). Finally, two items operationalise preferences for lower and more flexible employment protection ( loosening of the hire-and-fire legislation and increasing working-hours flexibilization ). 13 For the exact question wording, see Table 8 in the appendix. 15

17 Table 2: Operationalization of the conflict dimensions characterizing labor market policy Economic conflict Activation conflict State 1) The use of state programs to create jobs (statejob) 2) Raising the minimum wage (minwage) Pro activation Type 1: Human-capital activation 7) More retraining possibilities for the unemployed (training) 8) Promotion of labor market reintegration (reintgr) Type 2: Occupational activation 9) The promotion of short-time work (shorttime) Market 3) Tougher sanctions for those who refuse to accept an appropriate job (sanction) 4) Reduction of unemployment benefits (reducbenef) 5) Flexibility of working hours (workhours) 6) Loosening of hire and fire legislation (hirefire) Contra activation (Same items) The activation strategies are operationalized by means of three questions. The human-capital activation strategy is captured by the promotion of training and by the effort to reintegrate the unemployed in the labor market by means of activation measures ( reintegration ). The occupational model instead relies foremost on the retention of individuals in the labor market by means of short-time work (Sacchi et al., 2011, Estevez-Abe et al., 2001; Thelen, 2001). To test the first hypothesis and assess the dimensionality of the political space I conduct an exploratory factor analysis with varimax rotation 14. Thereby, I include the nine items shown in Table For each 14 Missing cases were recoded as neutral both in position and salience; fortunately they only represent between 2 and 5%. 15 The non-governmental organization Attac Germany was excluded from the analyses because it proved to be an outlier in the pooled model including all actors. Since this organization is only of minor importance in this policy domain, its exclusion seems to be legitimate. 16

18 item, I constructed an indicator which takes into account both the actor s position on a given measure and the salience of the measure for the actor 16. To assess the stability of the actor constellation, three different types of checks were run. First, the analyses were re-run only with parties and social partners (unions, employers associations) and state bodies since these actors are the most influential players and hence can be expected to decisively shape the labor market policy conflict. Moreover, the analyses were performed without issue salience weightings and for each country separately. 17 These additional analyses show that the actor constellations are stable. Analyses First, I test whether a two-dimensional labor market policy space can be found in all five countries included in the study. To this aim I show the pooled analysis including all 108 political actors (excepting Attac Germany) in a single model. As theoretically expected, Table 3 shows that the nine labor market policy items load on two distinct factors. However, the eigenvalues clearly indicate that only the state-market factor (column 1) forms a strong homogeneous scale (eigenvalue 2.34), whilst the elements on the activation dimension reach an eigenvalue of only 0.53 (column 2). 16 The combined indicator was developed by multiplying standardized salience and position for each actor. This strategy, which involves weigting position by salience, gives less weight to positions on measures which the actor considers irrelevant and allows the most significant conflicts to be captured. In fact, while political actors tend to have a stance on all issues, they may judge them differently in terms of relevance. To capture the fundamental political conflicts it is hence pivotal to focus only on those issues which are salient. An actor s position on a given policy measure is gauged on a scale ranging from 1 to 5 (strongly disagree - strongly agree). For the operationalization of a measure s salience, I asked the respondents to indicate the most important measure on the list that was submitted to them, the three most important measures, and the three least important measures. The resulting salience indicator allocates three points to the most important measure, two points to the other two important measures, zero points to the three least important measures and one point to the remaining ones. 17 See Tables 11 and 12 in the appendix. 17

19 Table 3: Pooled factor analysis (all countries) Items* State/market Activation Sanction Reduc. benefit Work-hours Hire-fire Minimalw State job Training Short-time Reintegration Eigenvalue N 108* 108* *Attac Germany was excluded from the sample This finding 18, however, is consistent with my argument that different activation conflicts should be expected depending on the labor market legacies of a regime. Accordingly, only when conducting regime-specific analyses do I expect to find an adequately strong regime-specific second factor. The activation factor should thus be characterized by functionally equivalent activation policies depending on the regime characteristics. Hence, to unveil the differences in the second conflict dimension in Table 4, I present the results of the regime-specific factor analyses. In line with the first hypothesis (H1) I can empirically corroborate that the political conflict in Western Europe circles around two types of labor market strategies, namely passive and active policies and but that the precise conflict configuration differs To interpret the findings of the factor analyses it is useful to consider that variables load strongly on a factor when these contribute to discriminating between the observations (in this case the political actors). Accordingly, a high factor loading is an indication that a policy is highly controversial. 19 The decision to analyze flexicurity and dualizing regimes separately is supported by the country-specific solutions presented in Table 11 and 12, which unveil that the conflict structure is rather similar for the countries belonging to the same regime, even though smaller deviations do appear, in particular for Germany. 18

20 Table 4: The factor state/market and the activation by regime Flexicurity Dualized Items Denmark and Switzerland Germany*, France and Italy State/market Activation State/market Activation Sanction Reducbenef Workhours Hirefire Minimalw Statejob Training Short-time Reintegration Eigenvalue N *Attac Germany was excluded from the sample Turning to the details of the findings summarized in Table 4, increasing sanctions, reduction of benefits, flexibilising working-hours, hire-and-fire regimentation and increasing the minimum wage determine the state/market factor. For this first factor, the regime specific variation is marginal, and concerns only the magnitude of the loadings and the allocation of the item public job creation which in the flexicurity countries pertains to the activation dimension rather than to the state/market conflict. While the composition of the economic factors is consistent across the regimes, the activation dimension is regime-specific. I find that in the flexicurity countries, the loadings for training and reintegration are rather low, which means that these programs are less controversial This uncontestedness supports the expectation that measures which are part of the regimes labor market policy tradition are less contested than alien ones. Hence, the undisputedness of active reintegration and training programs points to the strong human-capital orientation of flexicurity countries. 19

21 Conversely, policies which do not pertain to this repertoire (public job creation and short-time work) polarize more and hence display higher factor loadings. In the dualizing regimes, instead short-time work results to be the least controversial policy instrument. This is not surprising since it is the standard solution governments implement to address unemployment particularly in times of crisis (Sacchi, Pancaldi & Arisi, 2011). Conversely, and mainly because of the virulent insider-outsider debate that characterizes dualizing countries, measures addressing active reintegration - particularly of the labor market outsiders - are highly contested. The reason why reintegration measures for outsiders are debated is that particularly in times of austerity - welfare policy resembles a zero-sum game, where an expansion of outsider-friendly policies often disadvantages the insiders. Finally, also training is hardly implemented in dualizing countries. Since this approach proves effective in the Nordic context, political actors seem to debate and partially disagree on their implementability, which leads to a moderate loading of 0.4. In a nutshell, the expectation that policies which are uncharacteristic for a regime, are particularly subject to controversies and by consequence heavily determine the political contest, can be corroborated. First, I found that the structure of the economic dimension is rather consistent between the different countries, whilst the activation conflict is clearly regime specific. Second, the composition of the activation dimension closely mirrors the debates over policy measures which are atypical for the specific regime. Conversely, policies that are well-anchored in a country do not drive the political conflict. Accordingly, political actors in regimes with strong human-capital activation and already flexible labor markets debate the utility of short-time work, whereas regimes that apply short-time work wonder whether training and reintegration policies might be the better alternatives. 20

22 The actor constellations in the labor market policy space Flexicurity countries After describing the labor market conflict patterns let us now analyze the political actors preference-based coalition patterns. Figure 2 and 3 show the positioning of parties, employers associations, unions, SMOs, state bodies and the administration in the labor market space. The coalitions correspond to the quadrants which result from the state/market and the regime-specific activation factors which were presented above. In the first quadrant we find the modern left coalition, which is composed by actors who support both increasing activation effort and increasing state intervention. The actors located in the third way quadrant share a strong activation orientation but endorse market-liberal policies on the economic dimension. The remaining two coalitions both oppose an expansion of activation policies. However, whilst the traditional left coalition is strongly in favor of state intervention, the right coalition is for retrenchment on both the activation and the economic dimensions. 21

23 Figure 2: Actor configuration in the flexicurity countries (Denmark and Switzerland) Legend Denmark: Unions: AC Akademikernes Centralorganisation, FTF Confederation of Professionals, LO Confederation of trade unions; Employers organizations: DA Confederation of Danish Employers, DI Confederation of Danish Industry; Parties: SD Social Democrat party, Venstre Liberal Party, DF Dansk Folkepartis, KF Konservative Folketsparti, RG Red-Green Alliance, SF Socialist Folkeparti; Administration: NLMA National Labor Market Authority, DEC Economic Council, advisory board to the government; NGOs, Charities and Think-tanks: SFI Danish national center for social research, ECLM Economic Council of labor movement, CEPOS Conservative think-tank. Switzerland: Unions: Unia Unia, KV Kaufmännischer Verband Schweiz, Syna Syna Arbeitslosen Kasse, AS Angestellte Schweiz, SGB Scherizerischer Gewerkschaftsbund, TS Travail.Suisse, Gewerkschafts-dachorganisation; Employers organizations: SBV Dachverband Schweizerischer Baumeisterverband, SGV Schweizerischer Gewerbeverband, SAV Schweizerischer, Arbeitgeberverband, Swissmem Swissmem; Parties: Gruene Grüne Partei Schweiz, FDP Freisinning Demorkatische Partei, die Liberalen, SVP Schweizerische Volkspartei, CVP Christlichdemokratische Volkspartei, BDP Bürgerlich Demokratische Partei, SP Sozialdemokratische Partei; Administration: BE Canton Bern, AG Canton Argau, SODK Conference of the cantonal social ministers, SECO State Secretary for Economic Affairs; NGOs, Charities and Think-tanks, Caritas Caritas Switzerland, Attac Attac Switzerland, NGO, Kabba NGO on behalf of the unemployed, AvS Avenir Suisse Figure 2 shows that the modern left coalition in the flexicurity regime is composed of several unions, namely the Swiss confederation of trade unions (SGB), the Swiss union Travail Suisse and Unia, the Swiss union of professionals (KV), and the Danish union federation LO. Moreover, we find the coordinating 22

24 organ of the Swiss cantons (SODK), a Swiss SMO (Caritas), and the Danish Red-Green alliance as well as the Danish green-socialist party (SF). This composition supports rather well the hypothesis that in flexicurity countries foremost the greens and political actors without government responsibility endorse policies aiming at expanding redistribution and activation. All these actors hence endorse the strengthening of activation measures beyond the traditional repertoire to include measures such as short-time work and public job creation to complement the mainly human-capital focused activation strategy. Hence, this finding supports the hypothesis whereby actors without government responsibility can afford to suggest expansive reforms irrespective of the adverse economic context. In the lower left quadrant we find the traditional left coalition. This coalition is characterized by a moderately skeptical attitude towards non-standard activation policies and by a more or less clear endorsement of state intervention. The Swiss SMOs Attac and Kabba, and the Danish white-collar union FTF clearly endorse increasing state intervention and are located on the left extreme of the state/market dimension. Whilst still part of the traditional left coalition, the Swiss state actors (e.g. the cantons Aargau and Berne), the State Secretary for Economic Affairs (SECO), its Danish pendant (NLMA), and the Danish Folkeparti (DF) take a more moderate stance on the economic dimension. This left coalition includes actors who by tendency endorse generous welfare benefits but disagree on the necessity to introduce additional and untypical activation policies such as short-time work and public job schemes. This is not surprising since to a large extent these unions represent white-collar workers who profit more from training-related activation than from short-time work. Swiss state bodies instead can be expected to reject activation expansion in order to contain public spending. 23

25 These findings thus clearly contradict the hypothesis that state bodies and administrations in Denmark and Switzerland endorse a third-way strategy because of their contact with international and supranational bodies of experts. On the contrary, I find that state bodies and administrations are rather skeptical of expanding the activation repertoire and overall are oriented towards preserving the status-quo. The third way coalition is composed of the social-democratic parties, the Swiss Greens, the Swiss white-collar employees (AS), the Swiss employers organizations (SGV), and the Danish Economic council (ECLM), which is an advisory board to the labor movement. These organizations are strongly in favor of additional activation policies but for the preservation of the status-quo in terms of passive welfare effort. In this group we notice a clear outlier, namely the Swiss Christian-Democratic Party (CVP), who is favorable to a substantial liberalization and contemporaneously for an above average strengthening of the activation effort. The composition of the third way coalition sustains the hypothesis that where welfare states address traditional risks efficiently, social democratic parties are able to turn towards groups who are newly at risk. Hence, in the flexicurity countries these parties canfocus on the interests of the labor market outsiders who could be reintegrated in the labor market by means of public job creation schemes. But also industrial production workers - who in a post-industrial setting are under pressure from international competition and outsourcing - strongly profit from short-time work schemes. As expected, the traditional right coalition is composed mainly of the employers organizations (Swissmem, SBV in Switzerland and the DI, DA in Denmark), and conservative parties (the Swiss Peoples Party, the Danish Conservative party) and the conservative think-tanks (CEPOS and Avenir Suisse). All these actors share a pronounced market-liberal stance but differ widely in the degree to which they oppose additional activation policies. Finally, there is a moderate sub-group of traditional 24

26 right actors, namely the Swiss conservative democrats (BDP), the Swiss liberal party (FDP), the Danish liberal party (Venstre) who, in economic terms, favor the status-quo. Overall, the actor constellation in Denmark and Switzerland suggests that in countries where welfare state benefits are generous and contemporaneously problem pressure in terms of unemployment level is comparatively low 20, actors facing government responsibility are less likely to endorse an expansion of passive and active effort. 20 In 2010 the youth unemployment (as percentage of the youth labor force) for Denmark reached 13.8% and in Switzerland 7.2%. As compared to the UK (19.1%), Italy (27.9%) and France (22.5%) these figures are moderate. The only exception to this pattern is Germany with just 9.7% youth unemployment. The low level of problem pressure can be underpinned also with figures for long-term unemployment (as percentage of the unemployed). In 2010 Denmark this was 19.1% and in Switzerland 34.3%. Compared to France (40.1), Germany (47.4) and Italy (48.5) this again indicates a good performance on the part of the Swiss and Danish labor markets. Only the UK has similarly low levels of long-term unemployment (32.6%) (Source: OECD key tables 2010). 25