The Impact of Economic Globalization on the Employment Policies in 19 Western Democracies from 1985 to 2010. Limited Change or Radical Shift towards Workfare?

Ari-Matti Näätänen

doi:10.3390/socsci4030700

Abstract

Among the most significant issues facing welfare states are the implications of economic globalization for employment policies. This issue is confronted from the viewpoint of workfarism, the incentives created by social policies for increasing participation in the labor market. To measure the limited changes involved, the analytical framework also includes institutional stickiness, pointing to the capability of welfare state institutions to resist external pressures. Panel data on capital flow, an active labor market policy (ALMP), and unemployment benefit (UB) expenditures in 19 welfare states between 1985 and 2010 are drawn from the Organisation for Economic Cooperation and Development (OECD) and the KOF Index of Globalization (KOF). The Vector Autoregressive Moving-Average model with exogenous regressors (VARMAX)-regression analysis found institutional stickiness to be a more significant factor than capital flow in 61% of the observations. The impact of capital flow was particularly significant in the United Kingdom, and in northern and continental Europe, and a tendency toward workfarism was detected in 37% of the welfare states. From a comparative perspective, the impact via the increased capital flow to workfare-related policies is a matter of contrasts rather than a unilateral phenomenon.

Highlights

The impact of economic globalization on employment policies in the Western democracies is one of the most politically influential discussions ongoing in the social sciences
The objective of this study is to examine whether increased economic globalization measured by capital flow has resulted in tendencies towards workfarism in the 19 Western democracies between
Rather than perform an analysis of a specific subcategory of capital flow or active labor market policy (ALMP), this study examines the theoretically expected tendencies towards workfarism at the general level in 19 Western democracies

Summary

Introduction

The impact of economic globalization on employment policies in the Western democracies is one of the most politically influential discussions ongoing in the social sciences. Posits that intensified globalization has resulted in a tendency towards workfare states According to this train of thought, welfare policies are rearranged to stimulate labor supplies by raising the incentives to participate in the labor market. The regulationist theory identifies that economic globalization as the main driving force behind workfarism is an international phenomenon In this theoretical setting, employment policies are affected by economic globalization through global labor supply-oriented competition, causing policy-makers to accommodate workfarist policy recommendations [2]. The section reviews the central theories used in welfare state globalization discussions It demonstrates that, compared to the conventional theories in the field, the regulationist distinction between offensive and defensive workfarism provides original insights into the issue. This article contributes to the literature by assessing the diagnostic potential of the regulationist distinction between offensive and defensive workfarism in an advanced time-series analysis and comparing it to alternative theoretical approaches

Economic Globalization and Workfarism

Research Design

Results

Conclusions