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Home Opinion Europe’s welfare and labour market conflicts: A fatal squeeze on the centre-left?
Voters • Cleavages • Distributional Conflict

Europe’s welfare and labour market conflicts: A fatal squeeze on the centre-left?

Michael McTernan - 24 October 2013

Distributional conflicts between interest groups are pulling policy responses to the crisis in different directions. For centre-left parties, it has become increasingly difficult to hold together modern fragmented electorates

Political battles which pit different interest groups against each other in Europe’s labour markets and welfare systems are intensifying. They are making the task of assembling electoral coalitions and holding together a government more and more difficult for centre-left parties.

Many of the big tent ‘catch-all’ social democratic parties that dominated post-war Europe are becoming increasingly restrained in their ability to go it alone. The SPD, once the behemoth of German party politics scored only 26% in the recent Federal election. In terms of ‘catch-all’ appeal across the centre-left, it lost 8.6% to Die Linke on its left, and 8.4% to the Greens on its social-liberal wing. In the Netherlands, the PvdA, the historical fore bearer of Dutch social democracy, entered government in 2012 as a minority partner to the centre-right. It is now at 10.9% in the polls, the sixth most popular party in the country. The latest polls show it losing 11.4% to the Socialist party on its left, and 14% to D66 on its social-liberal wing.

In France, the picture is just as gloomy with the governing Socialists registering only 19% in polls for the European elections, losing 10% to the left-wing Front de Gauche and 6% to the Greens. The Nordics are by no means exempt from this vote erosion, with historical data in Sweden, for example, showing support for the Social Democrats (SAP) dropping steadily over the years from 45.3% in 1994 to 30.7% in the 2010 election. Today, the SAP leads the polls, but only on a figure of 33%, losing 7% to the Left party and 9.5% to the Greens. The Danish social democrats are polling on a lowly 20.1%, whilst the Norwegian Labour party have recently lost power. In Greece, the extreme example, the party system is convulsing, with PASOK, traditionally the biggest centre-left ‘catch-all’ party, now at 5.9% compared to the 46% it scored in the 2009 election.

Worse still these examples don’t yet account for the growing damage populist far-right parties are doing to social democratic coalitions by targeting working and lower-middle class voters with messages of social conservatism and ‘welfare chauvinism’, and by railing against the elite capture of politics and the negative impact of globalisation and Europeanisation. Nor do they account for the success of Angela Merkel’s brand of political cross-dressing (‘progressive’ centre-right parties increasingly following public opinion to adopt centrist or social democratic positions).

On the surface the UK may be sheltered from these trends by its electoral system, but contempt for the political class runs deep, with UKIP likely to make further inroads into the vote share of the mainstream parties. The Labour party cannot be complacent in this regard, as the UKIP leader Nigel Farage will increasingly manoeuvre to gun for Labour's traditional – and disaffected – base.

Given these corrosive dynamics, it is important to consider some of the distributional conflicts that are making it more difficult for centre-left parties to hold together modern fragmented electorates and interest groups. A set of welfare state and labour market divides are influencing policy responses to the crisis and fostering a dangerous climate of winners and losers.

The insider vs outsider conflict

Europe’s sluggish Labour markets and strained welfare states have accentuated an “insider-outsider” conflict that divides key centre-left voter groups in many countries. The interests of labour market ‘insiders’, who typically have stable employment and protections, are clashing with the interests of labour market ‘outsiders’, who tend to have high job insecurity and low pay.

In the context of recession and the sauve-qui-peut politics of toughening public attitudes towards government redistribution and social transfers, it is difficult for centre-left parties to appeal to both groups. As David Rueda and Johannes Lindvall have outlined, “if they emphasise policies that benefit insiders, they push outsiders to support more radical parties or to exit politics; if they propose policies that benefit outsiders, they risk losing support among insiders.”

In other words, if a centre-left party wants to appeal to ‘squeezed middle’ voters who have become wary of generous state redistribution to welfare recipients at a time when their own living standards are declining, then 'getting tough on welfare' clashes with another group of voters who, in a time of severe economic hardship, depend more than ever on a safety net and social transfers. Conversely, if they defend generous welfare spending, it risks ostracising those insiders who feel they are ‘working harder but not getting on’, while also attracting attacks from opponents on wasteful ‘high spend, high tax’ politics.

The gender inequality conflict

Gender inequality is an additional dividing line in the labour market insider-outsider conflict. In many parts of Europe, the majority of women can arguably be classed as labour market outsiders because their unemployment risk is considerably higher than that of men.  In the UK, women dominate low paid, low grade work. It is estimated that they constitute almost two-thirds (62%) of those on low pay and three quarters (74%) of part time workers.  This is exacerbated by the cut backs in public sector jobs, where women make up the majority of the workforce. Meanwhile, in the private sector, where women tend to have reduced pay opportunities across the board, low-wage jobs are growing in line with an economic recovery spurred on through ‘regressive redistribution’. It has been estimated by the TUC that close to 80% of private sector jobs created by the UK coalition government have been low-paid.

The electoral implications of gender inequality in the labour market are spelled out by Patrick Emmenegger and Philip Manow, who point out that with the decline of religiosity in western Europe, women are becoming key socio-economic swing voters in many countries. In the past, they would have predominantly voted for centre-right or Christian Democratic parties but in recent decades have moved firmly to left-of-centre parties. Centre-right parties, who face their own coalition squeeze, will increasingly recognise this drift and seek to rectify it by positioning on female-friendly policies. Emmenegger and Manow predict that spending on affordable childcare provision, all-day schooling and other welfare programmes that promise to ‘de-familialise’ services will increasingly be on the table as parties increasingly compete on this terrain.

The trade-off is that much needed social investment in childcare and levers to enhance gender equality in the labour market will most likely have involve either higher taxes (which is another conflict) or, alternatively, cut backs in other areas, such as pension provision and the retirement age. However, parties are unwilling to risk upsetting the loyal “grey” vote.

The young vs old conflict

There are firm grounds for a new politics of victim-hood among young people. Young people are increasingly losing the distributional game to their elders and their position as the net losers in Europe’s ailing welfare state settlements is worsening. As Bruno Palier of Sciences Po has shown in work collating OECD data on social security, spending on healthcare and pensions, which primarily benefit the elderly, is disproportionately higher than spending on education and training, which are largely geared towards younger generations, especially those who are under-skilled and under-protected.  Moreover, in times of limited youth opportunity, this also has a detrimental impact on social mobility, as richer parents and grandparents can use their resources and networks to give their children a leg up.

At the same time, older voters tend to be more-prized electoral groups due to the higher likelihood that they will turn-out and vote along traditional lines. Note the rise of the ‘50 plus party’ in the Netherlands, which fights for pensioners’ interests. Recent figures show that the child poverty rate in the Netherlands is 5.5 times higher than the rate of old age poverty. Likewise in Greece, where youth unemployment is 58.8%, the state spends six times as much on the elderly as it does on younger citizens. This ratio is only 3.4 in Sweden, which has a similar demographic structure.

The life-cycle effect in relation to welfare has to be of course acknowledged, nonetheless, how long will it be until we see competing ‘young people’ movements mobilising against the precarious position they are in? We see this already in Italy, also ear-marked as one of the most intergenerational unjust countries, where 47.2 per cent of young people (18-24) voted for Beppe Grillo’s anti-political Movimento Cinque Stelle. The risk is of a generation of voters set adrift from mainstream politics and losing faith in the welfare state.

Again the trade-offs come down to how to fund long-term social investment which will secure the futures of young people in a competitive global era. To whom the largest burden falls will be influenced to an extent by the outcome of public sector vs private sector conflicts.

The public sector vs private sector conflict

Adjusting to the debt crisis throws-up a public vs private sector conflict which sets the parameters for the welfare and labour market conflicts alluded to above. The extent to which adjustment falls on cut backs in the public sector as opposed to tax rises has been a divisive political battle-ground with many public sector workers – and services- falling on hard times due to the electoral success of centre-right parties across Europe.

The overarching reality remains the gap in public finances that developed in recent decades. For example, research highlights the decline in tax-to-GDP ratios in Europe between 2000-2008, despite healthy economic growth. As Jane Jenson has argued, one of the guiding mantras of the last three decades has been ‘no new taxes.’ In many cases the Left has been reluctant to grapple with the electoral trade-offs of raising taxes and, as Jenson asserts, where they have responded it tends to be on loading taxes on the rich, but there are simply not enough rich to fill the gap.

So in the absence of new national conversations on broader-based taxation, a considerable burden will fall on cut backs to the state, which means public sector workers and service benefactors will mobilise against parties not defending the public interest; while, if it goes the other way, and a party rejects cut backs and promises more spending and higher taxes for the rich, then different interest groups will turn on parties they see as showing favouritism to ‘tax and spend’ socialism and public sector ‘vested interests’. In each case a corrosive environment of winners and losers is created.

Another dimension to this conflict is that tax payers who don’t work in the public sector, stoked on by right wing media, may increasingly form the view that they are the losers in the distributional game. Public sector pension schemes can be a lightning rod in this regard with retirement benefit packages in the public sector tending to be comparatively more generous than many private schemes. In each incidence interest groups will mobilise against each other, whether it be reformers versus traditionalists or public sector unions versus tax payer alliances.

Fighting back in a decade of distributional conflicts

Political parties, especially of the centre-left, have struggled to adapt to these labour market and welfare conflicts as western economies try to recover from the impacts of the financial crisis on the public purse and to long term demographic trends such as ageing and pressures on health and social care.

In a much more heterogeneous society of diverse interest groups, social democrats have struggled to find ‘catch all’ rallying points to hold together a range of coalitions. In this climate of winners and losers, political support is increasingly conditional. It is hard at this juncture to see the day when mainstream European centre-left parties can hit over 40% of the vote again.

The talent set of tomorrow’s politicians will rely on narratives capable of closing some of these divides, for example framing a new social contract between grandparents and grandchildren. It will require well-honed coalition-building skills with other parties and movements. And, allied with a new moral vision of the economy, will have to come a raft of new political economy measures and revamped institutions alive to these trade-offs in an era where traditional redistribution-led tools are restrained. Priorities and sacrifices will have to be acknowledged with little room for sacred cows.

Political parties that make big promises in an effort to please all groups will likely find that they pay a heavy price when in office for not delivering. Ultimately it will turn people further away from mainstream politics. Like a chess board, the exercise of policymaking, coalition-building and government will be complex, difficult and risky. Going for broke to win will not be the wisest move.

Michael McTernan is deputy director of Policy Network. He is co-editor of ‘Progressive Politics After the Crash: Governing from the Left’ (with Olaf Cramme and Patrick Diamond).

Policy Network and Renewal Journal will run a series of seminars on alleviating welfare state and labour market distributional conflicts

This is a contribution to Policy Network's work on Social Policy and Changing Welfare States.

Tags: Opinion , Michael McTernan , Europe , France , Denmark , Norway , Greece , Germany , United Kingdom , UK , Netherlands , Welfare , Welfare State , Social Security , Left , Centre-left , Progressive , Progressives , Progressivism , Tax , Crisis , Financial Crisis , Economic Crisis , Debt Crisis , Sovereign Debt Crisis , Contributory Principle , Welfare Benefits , Benefits , Universalism , Means Test , Responsible Capitalism , Progressive Conservatism , Pensions , Social Insurance , Social Investment , Triangulation , Populism , EU , European Union , Globalisation , Insiders , Outsiders , Social Democracy , Coalition , Youth , Gender , Environment , Liberalism ,

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