Decommodification and activation in social democratic policy: resolving the paradox

Abstract

In Esping-Andersen's influential work decommodification appears as the central characteristic of the welfare state, and efforts to decommodify labour are posited to be the main goal of social democracy. Since decommodification is defined as exit from the labour market with little or no loss of income, social democrats' emphasis on decommodification clashes with another purported goal of social democracy, high labour force participation. Drawing on research demonstrating the divergent employment effects of various decommodifying social policies, we resolve the existing paradox by showing that social democratic parties are supportive of decommodifying social policies insofar as these policies do not reduce aggregate levels of employment. Pooled time series analysis of employment-impeding policies (long-term unemployment replacement rate, social security and payroll taxes, and employment protection) suggests that they are associated with Christian democracy rather than social democracy. Instead, we find that social democracy is a key determinant of employment-friendly policies, such as active labour market spending and short-term unemployment replacement rate. Given the radically divergent employment effects of different types of decommodifying social policies and the importance of employment-friendly policies for the viability of generous welfare states, our analysis further underlines the future viability of the social democratic model.