The Great Recession and Welfare State Reform: Is Retrenchment Really the Only Game Left in Town?

Abstract

AbstractBy 2010, when the Greek sovereign debt crisis changed into an existential crisis of the euro, all developed democracies entered a phase in which they had to consolidate their budgets, typically implying a politics of austerity. The scholarly literature, as well as the popular press, suggests that – consequently – welfare retrenchment and cost containment became the only games left in town. In this article, we study the welfare state reform measures taken between 2010 and 2012 in four countries characteristic of mature welfare state regimes (liberal, UK; conservative, Germany; social democratic, Denmark; and hybrid, the Netherlands) to examine empirically whether austerity has indeed become the only item left on the policy menu. Our analysis reveals that retrenchment features prominently on the agenda everywhere, but nowhere by itself. While compensation for income loss is rare since 2010, this still happens. More unexpectedly, reforms in line with a social investment agenda (like expansion of child care or active labour market policies) are still being pursued in all our four cases.