Introduction: Welfare State Transformation and Inequality in OECD Countries

Melike Wulfgramm, Tonia Bieber, and Stephan Leibfried

Inequality is on the rise: across Organization for Economic Cooperation and Development (OECD) countries, the distribution of economic, social, and political resources has become increasingly unequal since the ‘Golden Age’ of the welfare state (Esping-Andersen 1996), in the decades following World War II. At the same time, ongoing change in central social policy fields—prominently health, labour market, or pension policy—reflects deep welfare state transformation. This volume analyzes the link between

M. Wulfgramm (*)

Institute for Political Science, University of Southern Denmark,

Odense, Denmark

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T. Bieber

Federal Ministry of Education and Research, Germany S. Leibfried

Socium, University of Bremen, Bremen, Germany

© The Author(s) 2016 1

M. Wulfgramm et al. (eds.), Welfare State Transformations and Inequality in OECD Countries, Transformations of the State,

DOI 10.1057/978-1-137-51184-3_1

these two phenomena: How has welfare state transformation in core policy fields shaped development of the main dimensions of social inequality?

Disadvantaged groups of society are adversely affected by the increase in inequality, but not exclusively so; the middle class also faces stagnating or even falling real wages and a fear of joining the lower social strata in their struggle to maintain their living standards in spite of precarious employment or unemployment. Gains in economic growth have been concentrated at the upper end of the distribution scale, with both top incomes and especially return on capital exceeding the overall rate of economic growth (Piketty 2014; see also Frank 2013 or Foster and Wolfson 2010 on inequality and the declining middle class). Factors such as skill-biased technological change, demographic developments, mass unemployment, decreasing trade union power, and globalization have reinforced these distributional patterns (see Huber and Stephens 2014; Hurst 2016, 205). Thus, the richest percentiles in society are getting richer in terms of both income and accumulated wealth, while the middle and especially lower classes are falling increasingly behind.

In social policy research, inequality can be analyzed both as a determinant and an outcome of welfare state transformation. Similarly, the welfare state and its policy-makers can be seen as reactive or proactive actors with respect to societal developments. Regarding inequality as a force explaining social policy change, rising market inequalities and the spread of so-called ‘new social risks’ (Taylor-Gooby 2004; Armingeon and Bonoli 2006) have posed new challenges to the welfare state. Social and economic pressures have forced policy-makers to reconsider the ever more generous social- policy path of the post-war decades. Furthermore, inequality may actually trigger political dynamics that weaken—rather than strengthen—the redistributional capacities of the welfare state, which, for instance, was the argument in the political reinforcement hypothesis of Barth et al. (2015) and contradicts the famous but empirically largely unsustainable Meltzer and Richard (1981) model. This rather reactive framing asks whether and to what extent increased societal needs have overburdened the welfare state’s capacities with demands to compensate for market inequalities.

While we acknowledge this focus on inequality as a determinant of social policy change, contributions to this volume are even more a pro- pos to the second perspective: namely, what distributional implications the recent welfare state transformation has brought about. We stress that policy-making has not only defensively reacted to existing market pressures, but it has also actively shaped the inequality patterns that can be observed today. While the market pressures mentioned above have been major forces driving inequalities since the 1980s, selective cuts in the generosity of social transfers, tax-policy reforms, and the overall paradigmatic shift from compensation to supply orientation in social policy have contributed to the stratification of society. Our comparative study thus seeks to shed light on how transformations of the welfare state affects economic, social, and political inequalities. We study this relationship in OECD countries at the threshold of the twenty-first century. Using both quantitative as well as qualitative research methods, we intend to capture the complexity of reforms across different policy fields, which, taken together, cover all crucial aspects of welfare state transformation.

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