Full Employment and the Welfare State

Abstract

The modern welfare state and full-employment policies have common intellectual roots. In the 1930s and 1940s, Keynesian visions of full employment and Beveridge-inspired ideas of a universal welfare state grew up in about the same intellectual environment. Both ideas emphasized a government' s responsibility for the welfare of its citizens. The two ideas were also projected by approximately the same individuals. From the very beginning, welfare-state arrangements and full-employment policies were regarded as strongly complementary. Both were designed to improve the economic security of the individual, although welfare-state arrangements deal largely with life-cycle considerations, while full-employment policies focus on the situation at a given point in time. They were also believed to support each other. Not only would high aggregate employment help finance the welfare state by boosting the tax base and keeping down the number of beneficiaries. A reverse causation was also assumed: various welfare-state arrangements were often asserted to contribute to full employment. Hence a virtuous circle was postulated between the welfare state and full employment. Governments also constructed specific institutionaI arrangements and regulations that were explicitly designed to strengthen the consistency and complementarity between the welfare state and full­ employment policies. Actual economic and social developments during the first decades after World War II seemed to support the view of a harmonious, indeed symbiotic,