Subsidizing wages or supplementing transfers? The politics and ambiguity of in‐work benefits

Abstract

AbstractIn‐work benefits (IWB) have become mainstream social policy programmes in modern welfare states. Aimed at employment promotion as well as poverty reduction, their introduction and expansion have been supported by both centre‐right and centre‐left governments. However, the article argues that policy positions towards IWB are essentially unstable. Political preferences can alter fast, with the same actors advocating IWB growth at one time and containment at another. In part, this is influenced not only by prevailing socio‐economic conditions but also by the institutional shape of IWBs, their interaction with complementary policies, and their inherently ambiguous nature. Characterized by multiple aims, IWBs occasionally offer political opportunities but often create challenges and even confound policymaking. Thus, the understanding of the politics of IWB requires a careful consideration of the particular properties of concrete IWBs and the ways in which they relate to other policy arenas. The article discusses this with reference to relevant debates and reforms in Germany.