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The changing role of political parties in the reform of

continental pension regimes

Changing electoral constituencies as drivers of reform

Silja Häusermann

silja.haeusermann@ipz.uzh.ch

University of Zurich

Abstract

Over the last decade, the main puzzle in the analysis of continental European welfare states has shifted from the explanation of stability to the explanation of change. Rather than being “frozen landscapes”, most continental welfare states have indeed undergone far-reaching retrenchment and restructuring, even in the field of pensions, which supposedly is the most „path dependent“ welfare policy. Moreover, even left-wing political parties and even trade unions have played a major role in cutting back existing pension rights in several countries. How can we explain the contents and coalitional dynamics of these reforms? This contribution reviews four existing hypotheses for the explanation of the recent welfare reforms, arguing that all of them leave major questions unanswered. It then proposes a fifth hypothesis, arguing that we need to link the analysis of policy-making by parties and unions with an analysis of the changing socio-structural constituencies these actors represent. When looking empirically at the profile and preferences of the electorate and membership of parties and trade unions, it can be shown that the recent reforms cater to new constituencies, rather than the blue-collar workers, who were the core beneficiaries of the industrial welfare state. However, since the left-wing electorate has become very heterogeneous, the left is increasingly divided in policy-reforms. Empirically, socio-structural transformations and the preference profiles of constituencies in Switzerland, Germany and France are analyzed by means of survey data. In a second step, an analysis of collective actor positions in the reform space shows how these micro-level transformations affect the coalitional dynamics in three major pension reform processes in the early 2000s. Methodologically, I use factor analysis to analyze the dimensionality of the policy space, and the configuration of actors in this space.

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Introduction1

Over the last decade, the main puzzle in the analysis of continental European welfare

states has shifted from the explanation of stability to the explanation of change. The

very influential neo-institutionalist literature of the 1990s argued that continental

welfare states are “frozen landscapes” (Esping-Andersen 1996), in which endogenous

dynamics of increasing returns and power asymmetries foster institutional inertia and

path-dependence, thereby making far-reaching change electorally risky and highly

unlikely (Pierson 1996, 2001). The arguments of this literature seemed very

convincing: the insurance-based and contribution-financed continental social policy

schemes create – by means of a policy feedback - their own constituencies of

beneficiaries and “regime stakeholders”, which oppose any retrenchment or re-

allocation of resources further down the road (see e.g. Campbell 2003). Governments

who want to reform existing policies face a tremendously difficult task, because they

face increasing groups of reform opponents, which may punish them for retrenchment

at the next election. Hence, there exists a status quo-bias in the institutional

architecture of continental welfare states, whereby they become “trapped” in a vicious

circle of increasing problem load (high labor costs, low employment rates, economic

downturn, demographic ageing) and a structural inability to reform.

However, as convincing as this analysis was, far-reaching welfare state reforms in

most continental welfare states from the late 1990s onwards soon proved it wrong.

Even pension regimes, where institutional policy feedbacks are strongest, underwent

deep changes all over continental Europe. Not only have pension rights of the

standard insured been lowered, but most countries have genuinely restructured their

pension-architecture by devising entirely new “pillars”, such as capitalized pension

savings schemes, means-tested minimum pensions or specific pension rights for labor

market outsiders and women (see, e.g. the works of Vail 2004, Palier 2002, Natali and

Rhodes 2004 on France; Bonoli 2000, 2001 on Switzerland: Nullmeier and Rüb 1993,

Hering 2004 and Busemeyer 2005 on Germany; Rhodes 2001 and Natali and Rhodes

2004 on Italy; Chulià 2002 and Natali and Rhodes 2004b on Spain; Anderson 2001 on

Sweden; and Schludi 2005, Häusermann 2007 and Bonoli and Palier 2007 for

1 I would like to thank Christoffer Green-Pedersen, Bruno Palier, Philip Manow, Herbert Kitschelt, Jonah Levy, Mark Vail, Adrienne Héritier, Vivien Schmidt, Hanspeter Kriesi, Johannes Lindvall and Pablo Beramendi for helpful suggestions and comments.

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comparative analyses of continental pension regime change). The most surprising

aspect of these reforms is the enactment of considerable benefit cuts in the general

public pension levels, because these cuts were expected to encounter the opposition of

almost all future and current pensioners (Pierson 1996, Schludi 2005). In addition, the

expansive reforms elements that were enacted benefit mostly to higher income groups

(as in the case of new savings opportunities for capitalized pensions) or to new social

risk groups, i.e. women and atypically employed (as in the case of means-tested

pension minima or pension credits for the upbringing of children), which are

generally only weakly represented in political parties, trade unions and parliaments

(Bonoli 2005, Häusermann 2010). Hence, all these changes are precisely the kind of

distributional reforms institutionalists would not expect to happen. Therefore, the

current literature increasingly tackles the question of change, not stability. As Starke

puts it: “the scientific puzzle has gradually shifted from the question as to why

welfare states have not been dismantled to the question as to why (and how) cutbacks

have nonetheless taken place in democratic political systems.” (Starke 2006: 106).

How can we explain these changes? Why did and why could governments take the

electoral risks attached to these reforms plans? There are four existing hypotheses and

explanations in the literature, and I will review them in the first part of this

contribution. Two explanations deal with governments’ ability to avoid blame for

retrenchment, by hiding the reforms (e.g. Pierson 1996) and by discursive framing of

them (e.g. Green-Pedersen 2002, Stiller 2007). A third hypothesis relies on party-

competition: governments can cut back if voters have no opportunity to punish them

at the polls (e.g. Kitschelt 2001). And a fourth explanation focuses on the ability of

governments to selectively compensate some losers of the reforms (e.g. Natali and

Rhodes 2004b, Schludi 2005, Levy 1999). However, all of these explanations leave

major questions unanswered: Why and how can politicians fool voters? Why would

all voters be convinced by a similar discourse? How can governments construct

sufficient majorities for pension restructuring? And why would left-wing parties

propose retrenchment in the first place?

In this contribution, I propose a new explanation of policy change, which links the

changing architecture of continental pension schemes to socio-structural change of

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party electorates and trade union constituencies. The model of reform dynamics I

propose can be seen as a socio-structural complement to the arguments of

compensation and political exchange mentioned above. I would like to demonstrate

that these reform packages have an underlying structural rationale: we cannot make

sense of the specific content of these packages if we do not consider that party

constituencies and their preferences have changed over the last decades. Left-wing

parties today represent a heterogeneous amalgam of working- and middle-class

voters, which differ very strongly in their views as to how and for whom states should

provide public welfare. I argue that when looking at these socio-structural

transformations of the policy space, the recent reforms become much less surprising.

Rather, they do make sense even in electoral terms.

I focus my theoretical framework and my empirical investigation on pension policy,

because pensions are considered to be a “hard case” for reform. They entail a lot of

vested interests, power asymmetries, and policy feedback mechanisms. Therefore,

they are most unlikely to be significantly reformed.

The contribution is structured as follows: In a first party, I review the four existing

explanations of pension regime change. In a second part, I will develop my argument

on the socio-structural changes that underpin the current pension reform dynamics.

After a brief section on data and methods, I will test and illustrate this fifth

explanation empirically in two steps: first, I will show the transformation of party

electorates and trade union constituencies by means of individual-level survey data

and secondly, I will show empirically how these changes played out in three major

pension reforms in Germany, France and Switzerland in the early 2000s.

1. Theoretical framework: Four explanations of the unfreezing of continental

welfare states

All four existing explanations of the recent reform dynamics in continental pension

regimes are very actor-centered. They all focus on the achievements of particularly

lucky, or strategically and rhetorically gifted leaders, and thereby they have a

somewhat heroic and voluntaristic undertone.

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According to Pierson (1994, 1996), the reform of mature welfare states in a time of

permanent austerity becomes an exercise of blame-avoidance, because almost all

voters are stakeholders of the mature social insurance schemes. Consequently,

governments must find ways to shift, avoid or deal with the blame that comes with

welfare retrenchment. The first two explanations for recent change suggest that some

governments find ways to enact unpopular reforms, and not be blamed for doing so.

1.1. The obfuscation argument: hiding the consequences of reforms

In the early works in which Pierson outlined his neo-institutionalist conceptualization

of the new politics of the welfare state (Pierson 1994, 1996), he argued that one of the

remaining means for governments to enact retrenchments was “obfuscation”, i.e. the

concealment of the negative consequences of reforms. The argument suggests that

strategically skilled elites would not cut back benefits directly (such as e.g. by

lowering the amount of a full pension), but via other, more technical and less obvious

reforms. Examples could be the lowering of pension indexation, or the extension of

the contribution period that is required for a full pension2. The obfuscation-argument

assumes that voters are much less aware of parameters such as indexation and benefit

calculation formula than of other policy parameters such as the age of retirement or

the amount of a full pension.

Some evidence seems to confirm this assumption, since governments indeed started to

cut back pension indexation in the late 1980s before turning to the plain cutbacks of

pension levels (Pierson 1996, Schludi 2005, Häusermann 2010). However, there are

both theoretical shortcomings and empirical counterevidence to the obfuscation-

argument. Empirically, there have been very clear-cut pension cutbacks in many

countries over the last years. The increase of women’s retirement age to 65 in

Switzerland or the introduction of the legal age of retirement from 65 to 67 in

Germany are just two examples. Also in Germany, the target replacement rate has

been lowered from nearly 70% to less than 50% only between 2001 and 2005

(Häusermann 2010). These are reforms that were very visible, heatedly discussed and

yet implemented. But the theoretical counter-argument is even more important: it is

2 If pensions are not indexed on inflation of prices (or wages), they fall “automatically” in real terms over the years. Similarly, if the required contribution period for a full pension is extended from, say, 40 to 43,5 years (such as in France in the 1990s, see Palier 2002), this actually equals an increase in the legal age of retirement or – given that most contributors do not have sufficiently long careers anymore – a lowering in the pension levels.

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hardly convincing that in a democracy, governments and elites can “fool” voters with

cutbacks going unnoticed, because there are controls: the opposition parties, the

media, independent experts, interest organizations all have expertise in this field.

They know and they can evaluate what it implies not to index pensions or to increase

the number of required contribution years for a full pension. If we assume that politics

is made by strategic actors behaving rationally within the limits of their knowledge –

which Pierson clearly does assume -, it is unlikely that governments can obfuscate the

consequences of reforms. Hence, the obfuscation-hypothesis falls short in answering

several questions: why would voters be ignorant, and why is there no opposition,

expertise, and counter-evidence to the government reform proposals and strategies?

1.2. The framing argument: Convincing voters of the necessity of retrenchment

The second explanation of retrenchment also implies a somewhat heroic assumption

of policy leadership. In this perspective, reforms are the achievements of political

leaders, who manage to convince a majority of the electorate of the necessity of the

proposed changes. Most authors who rely on this hypothesis conceptualize policy

discourses in terms of framing strategies. Stiller (2009) analyzes German pension,

labor market and health policy reforms by referring to the “ideational leadership” of

strong politicians such as German ministers Walter Riester or Wolfgang Clement. In

the field of pensions, Riester managed to frame the introduction of the private,

capitalized pension pillar as a means to save the traditional PAYG-system. Similarly,

Hering (2004) observes that the Social Democratic government had a very strong

discourse on the need and inevitability of retrenchment, which changed the perception

of reforms in the public opinion. The interaction of strong problem load and the

reformist discourse created a window of opportunity for “creative opportunism” of

party leaders and governments (Hering 2004). Green-Pedersen also bases his

explanation of retrenchment policies in Denmark and the Netherlands on the ability of

governments to present cuts as legitimate. A strong party consensus on the direction

of reform (facilitated by centripetal party competition) allowed the Dutch government

in the 1980s to implement retrenchment (Green-Pedersen 2002). All three authors

explain reform politics as a top-down process, where leaders convince voters of the

need for reform. Vis and van Kersbergen (2007), by contrast, analyze leaders’ and

voters’ preferences separately, but they, too, suggest that reforms occur when both

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sides are convinced that it is necessary and justified to cut back benefits. Based on

prospect theory, they argue that if both voters and governments are convinced by the

necessity of reform, they may become risk-seeking and engage in reforms. Again,

governments influence the evaluation of the reform-necessity by the voters by

framing reforms.

It is certainly true that policy leaders develop discourses to legitimize unpopular and

hurtful reforms. But it remains unclear why voters would adhere to these discourses,

if the reforms really cut back their own benefits. It is even less clear why all voters

would adhere to a same discourse or a single “frame”. As with the obfuscation-

argument, leaders are again assumed to be highly rational and even manipulative,

while the electorate is viewed as far less rational. One could argue that voters may

well believe in the overall necessity for reforms, but still oppose the cutbacks of their

very own, individual benefits. In addition, one would expect the opposition or trade

unions to develop counter-discourses in order to challenge the dominant frames.

To some extent, both hypotheses – “obfuscation” and “framing” - are somewhat

“apolitical”, since there is no political power struggle between reform winners and

reform losers over different policy options or over different discourses. Voters are

either fooled or convinced by leaders, and they let themselves be fooled or convinced.

Such explanations assume a strong rationality of political actors, but lack a

theorization of the response to framing or obfuscation strategies.

The third hypotheses one finds in the literature does not rely on blame-avoidance, but

on power relations. Actors can enact retrenchment, if they are in a position in which

they can afford taking the blame for it.

1.3. The electoral argument: Nixon goes to China

The third explanation of retrenchment suggests that governments may implement

unpopular reforms, if they have little to fear in electoral terms. There are two variants

of this hypothesis, one based on party competition (Kitschelt 2001, to some extent

Green-Pedersen 2002) and one based on issue-ownership (Ross 2000). Both theses

want to explain how we can understand that left-wing governments actually seemed

even more successful in enacting cutbacks than their conservative competitors.

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Kitschelt’s argument is very straightforward: governments can afford retrenching if

voters have no alternative to turn to in the next elections. In Germany, the red-green

government that was in place between 1998 and 2005 managed to enact retrenchment

reforms in many fields, notably pensions and unemployment insurance. These

cutbacks were similar to the ones the right-wing Kohl government tried to implement

in the mid-1990s. However, while the Kohl government suffered a dramatic defeat at

the polls in 1998, voters were somehow at a loss of alternatives when it came to

punishing left-wing governments3. They still perceived conservative parties as an

even bigger threat to the welfare state than the left-wing government parties. Fiona

Ross (2000) also builds on this idea of voters’ perception of specific party policies. In

line with saliency theory of party competition, she assumes that parties “own” specific

issues or policy fields, in which voters estimate that they are particularly competent.

Hence, if both left- and right-wing governments enact the very same reforms, they are

not perceived in the same way by voters4. This argument can be labeled “Nixon goes

to China”, referring to the fact that Nixon was the first American President to be able

to go to China, precisely because nobody suspected him to have any kind of approval

for the communist regime. In short, “voters do not trust rightist parties to reform the

welfare state, … Cuts imposed by the left may be viewed as trade-offs for increased

spending in other policy areas, absolute essentials, strategic necessities, or, at a

minimum, lower than those that would be experienced under parties of the right”

(Ross 2000: 164).

Both lines of this third explanation for changes convincingly explain why Social

Democratic governments in Germany and the UK were – at least in the short run -

able to implement some of the harshest welfare reforms of the last decades. However,

there are two things that these explanations cannot account for: firstly, in some

countries, right-wing governments successfully enacted policy retrenchment, as well.

France is a prime example, where the Balladur government in 1993 and the Raffarin

government in 2003 enacted considerable pension cuts (Palier 2002). Similarly,

pension cuts in Italy took place under technocratic and conservative, not left-wing

3 Meanwhile, of course, the Social Democratic party split precisely because of this unpopular reform agenda of its government, and the „Linkspartei“ today represents the left-wing alternative voters were lacking in the early 2000s (Picot 2008). 4 With regard to the New Labour-reform agenda in Great Britain, Ross demonstrates that many reforms of the Blair-government attracted support, even though similar conservative proposals arouse strong opposition (2000: 161).

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rule (Natali and Rhodes 2004b). In addition, the Nixon-goes-to-China logic may

explain why left-wing governments could enact retrenchment, but it leaves a very big

question mark as to why they would want to do so in the first place. As Starke notes:

“the underlying motivation for cutbacks is still little understood”. Ross (2000: 160)

refers to “genuine non-leftist preferences of certain party leaders” and that

governments changed their conceptions of viable policy options. Similarly, Anderson

(2001) argues that encompassing, corporatist trade unions and Social Democratic

parties perceived a (long-term) interest in preserving the viability of the welfare state

in the face of austerity and demographic pressure. However, these arguments seem

somewhat functionalist. As with the framing argument, it remains unclear why their

members would be willing to accept their specific benefits to be cut.

The fourth explanation of change does not build on blame-avoidance, either, but

rather on credit-claiming strategies. Governments target welfare reforms to particular

groups, in order to make them politically acceptable.

1.4. The strategic argument: “Vice-into-virtue” and selective package deals

The starting point of this fourth explanation of welfare reforms is that these reforms

are not just about retrenchment, but also about a genuine restructuring of the

distributive consequences of welfare regimes (Ross 2000: 158), entailing both losers

and winners. Again, this argument comes in two variants: selective compensation

(Natali and Rhodes 2004b, Bonoli 2000) and “vice into virtue” (Levy 1999).

The compensation-argument turns the focus of the new politics-literature away from

retrenchment only and tries to bring in the multiple goals and reform strategies that

characterize current welfare reforms. Natali and Rhodes (2004b: 5) identify four goals

that policy-makers may pursue: financial viability, economic competitiveness, equity

and effectiveness. Governments may tie reform packages that combine different

goals, thereby catering to different interests in specific ways. Trade unions in the

Italian pension reforms, for instance, could be compensated for retrenchment by

means of stronger organizational powers5. Similarly, governments in France and Italy

mitigated opposition to pension cutbacks by excluding current pensioners – and

5 Anderson (2001) makes a similar argument on Sweden, where trade unions and the Social Democrats participated actively in the consolidation of unemployment and pension insurance with – among others – the goal of preserving their organizational interest as important actors in these policy fields.

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public sector pensioners in France - from the reforms. Bonoli and Palier (2007) have a

similar argument: most pension reforms in continental Europe are phased in over a

very long period of several decades. Thereby, current pension beneficiaries who are

expected to be among the most ardent defenders of the status quo are compensated

and their opposition diminished (see also Anderson and Lynch (2007) for a more

elaborate analysis of the conditions under which pensioners’ interests influence the

positions of trade unions). Schludi’s (2005) account of the reforms of Bismarckian

pension regimes can be read in a similar way: governments make concessions to

potential veto players, such as trade unions, in order to mitigate their veto power.

It is certainly true that most pension reforms exempt current pensioners from heavy

cutbacks, thereby shifting the entire burden of retrenchment to the young. However,

the active population still represents an electoral majority in all European

democracies, and the exemption of the elderly from cutbacks aggravates the benefit

cuts they suffer themselves. Hence, it remains difficult to understand why these

reforms can be enacted without major opposition. It seems unlikely that the

exemption of the elderly or some organizational competencies for trade unions suffice

to construct a majority for these reforms.

The second variant of the strategic argument resolves this question by arguing that the

recent reforms combine several beneficial effects into “modernizing compromises”

(Bonoli 2001) or “virtuous” policy reforms (Levy 1999, 2001), which simultaneously

enhance the efficiency and equity of continental welfare regimes. Thereby, the

reforms contribute to a more equitable and efficient welfare state, and thus enjoy

broad legitimacy and support. Levy’s argument starts from Esping-Andersen’s (1990)

observation that continental welfare regimes are highly inegalitarian: “they are

fiscally regressive, too generous in some areas while not generous enough in others,

discriminatory against women wage earners, and dissuasive of job creation” (Levy

1999: 245). Governments may target specific inequities or “vices” – such as over-

generous public sector pensions or universal child allowances that are paid even to

middle- and upper-class families – and reallocate spending to the truly needy (i.e. the

poor in Levy’s account (1999) and new social risk groups in Bonoli’s

conceptualization (2005)). Levy (1999, 2001) sees this “vice into virtue”-strategy as a

means for (left-wing) governments to provide resources to their own constituencies

without increasing overall government expenditures (Levy 1999: 247, 256).

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Of course, the idea of welfare reforms, which allow overcoming the equity-efficiency

trade-off by taking money from those who don’t really need it and redistributing it to

the truly needy is appealing. However, in a perspective of distributional politics, it can

hardly be overlooked that there are not just winners of these reforms, but also losers,

namely the middle- and higher-income earners, who lose their benefits and privileges.

Moreover, these social strata tend to be more organized and better represented in the

political arena than the poor or the victims of new social risks (i.e. mostly women and

atypical, precarious workers). Hence, the question remains how governments can

possibly overcome the opposition of the powerful against these reforms? Again, how

can they gain majorities for their reform packages? Why would the higher income-

classes agree to cutbacks of their own benefits?

In the next section, I would like to develop a fifth explanation of welfare reforms that

is very close to this fourth explanation, but complements it with a conceptualization of

actors’ motivations. I also hypothesize that governments focus on credit-claiming,

rather than on blame-avoidance, and they tie specific reform packages in order to

receive sufficient support in the electorate. However, I do not assume that

governments are heroic or opportunistic leaders who arbitrarily grant benefits to

specific groups. Rather, I suggest that political actors defend the relatively narrow

interests of their constituencies. And since the constituencies of the major parties –

particularly on the left – have deeply transformed over the last decades, the policies

these parties advocate have transformed, as well.

2. A socio-structural argument: new conflict lines underlying coalitional reform

dynamics

With the model of change I develop in this contribution, I would like to add a socio-

structural basis to the conceptualization of reforms in terms of policy-packages. In

much of the compensation- or political exchange-literature, decision-makers are

“creative opportunists” (Hering 2004), i.e. skillful leaders who deliberately choose

particular reform goals and combine them in a strategic way. Authors such as Natali

and Rhodes (2004b) analyze the strategies of governments as almost completely

detached from the interests of their actual party constituencies. Others, such as Levy

(1999) take it for granted that the left represents the poor and underprivileged, without

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testing this assumption empirically. In contrast to these approaches, I contend that

these package deals are not the fruit of fortuitous coincidences or macchiavellistic

policy-makers, nor are they miraculous win-win-solutions that overcome hard

distributive choices. Rather, I consider post-industrial welfare politics largely as a

zero-sum-game, since resources are scarce and the needs and demands of different

social groups diverge strongly. Therefore, I argue that these reforms can be traced

back to the interests of particular social groups, i.e. they have an underlying socio-

structural rationale.

My argument is that post-industrialization has transformed the electoral

constituencies of political parties, as well as the constituencies of major trade unions.

If we understand these socio-structural transformations, we can better explain why the

collective actors enter seemingly “surprising” alliances and why they propose these

packages and political exchanges. In brief: there is a structural basis and explanation

for the recent welfare reforms.

Surprisingly, this transformation of party and union constituencies is oftentimes

overseen. Some of the most prominent literature on current Social Democracy and

left-wing policies (e.g. Rueda 2005, 2007; Levy 1999, 2001; Natali and Rhodes

2004b; Bradley et al 2003; Pontusson and Rueda 2009) still assumes that the left

advocates the interests of the “average production workers”, i.e. the male, industrial,

low- or semi-skilled worker with a modest income and a standard employment

biography. However, in a post-industrial society, the average production worker

becomes an “endangered species”, i.e. he is certainly not the average wage-earner

anymore, nor is he necessarily the typical left-wing voter (Kitschelt 1994, Kriesi et al.

2008). Recent studies even show that at least in Europe, blue collar workers are as

likely to vote for populist right-wing parties than for the left (Oesch 2006, Bornschier

2010, Häusermann and Walter 2010). A meaningful conceptualization of today’s

party constituencies and their interests requires an adaptation of the industrial class

scheme to post-industrial conditions.

The post-industrial transformation of the economy and labor markets in continental

Europe has been driven since the 1960s by mainly three trends (Oesch 2006):

Deindustrialization, i.e. job growth in the service sector and a decline of the

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industries; the educational revolution, i.e. an expansion of the new middle-classes

(Kriesi 1998); and the feminization of the labor force, i.e. the massive entry of women

in the labor market. These trends have deeply transformed the class structure of the

labor market, by creating new classes of privileged or precarious workers, horizontal

differentiations of the middle-classes and – thereby – new conflict lines. Oesch (2006)

has developed such a post-industrial class schema that takes into account not only the

vertical stratification of opportunities and interests, but also the horizontal

differentiation with regard to work sectors and work logics6. This new class schema is

most helpful for the analysis of current party constituencies and interests.

Figure 1: The post-industrial class schema

Independent work logic

Technical work logic

Organizational work logic

Interpersonal work logic

Technical experts (e.g. executive engineers) Capital accumulators CA

Professional/ managerial

Large employers, liberal professionals and petty bourgeoisie with employees (e.g.entrepreneurs, lawyers) Capital accumulators CA

Technicians (e.g. engineers) Mixed service functionaries MSF

Higher-grade and associate managers (e.g. financial and managing executives) Capital accumulators CA

Socio-cultural (semi)-professionals (e.g.teachers, health professionals) Socio-cultural professionals SCP

Associate professonal / managerial

Petty bourgeoisie without employees (e.g. small shopkeepers) Mixed service functionaries MSF

Skilled crafts and routine operatives (e.g. machine operators, laborers in construction) Blue-collar workers BC

Skilled and routine office workers (e.g. office clerks) Mixed service functionaries MSF

Skilled and unskilled service (e.g. salespersons, waiters) Low service functionaries LSF

Generally / vocationally skilled and unskilled

Note: Adapted from Häusermann (2010), based on Oesch (2006) and Kitschelt and Rehm (2005). For the classification of occupations (ISCO-2d codes), see appendix figure A1.

Kitschelt and Rehm (2005) have collapsed the original 9 categories in 5 classes that

are reasonably homogenous in terms of their welfare-state preferences and values:

6 The horizontal axis differentiates occupations in terms of the dominant work logic: an independent work logic implies autonomy and a focus on efficiency and profitability. People with a technical or organizational work logic are in jobs that are oriented towards the organizational goals of their employer or the production efficiency. By contrast, people in interpersonal occupations are focused on the people/clients/patients, with whom they interact. The vertical axis represents the structuration of skill-differences between different strata. For a classification of occupations see appendix figure A1.

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capital accumulators (CA), mixed service functionaries (MSF), low service

functionaries (LSF), blue collar workers (BC) and socio-cultural (semi-)professionals

(SCP) 7.

My argument is that the constituencies of political parties have changed in terms of

these classes, and that these changes are key for explaining recent welfare state

restructuring. The transformations have clearly been strongest on the left side of the

political spectrum: the left today draws mostly on a combination of blue-collar

workers (BC), low-skilled service sector workers (LSF) and high-skilled socio-

cultural professionals (SCP, the new middle classes). Social democratic parties tend to

be torn between two poles: on the one hand, they still represent their “old” industrial

constituency (BC), but since the 1970s, the “new left” also mobilizes strongly among

higher-skilled middle-classes, women, and public sector workers (Kitschelt 1994,

Kriesi et al. 2008). These new sections of the left-wing electorate are neither the core

beneficiaries of continental welfare states (since many of them are female, atypically

employed etc.), nor are they the social groups with the strongest poverty risks. Hence,

if social democratic parties start advocating cutbacks, this may not represent a

“depoliticization of policy-making” as stated by Natali and Rhodes (2004b: 23), but it

may rather correspond to the interests of a new part of their electorate. Green parties

are a particularly pronounced version of the new left: they attract mostly high-skilled,

female voters in service sector occupations and with a strong libertarian value profile.

By contrast, trade unions tend to remain more strongly rooted in the industrial, rather

than the service sector, and among male workers in standard employment

(Ebbinghaus 2006). However, the labor movement today has also become very

heterogeneous: different sectoral trade unions diverge in their policy preferences,

depending on the skill-levels and job profiles of the members they represent

(Häusermann 2010b). Finally, changes of party constituencies have not only affected 7 Capital accumulators are higher-grade managers, employers, self-employed in liberal professions (physicians, lawyers etc.) and technical experts. They are highly skilled and tend to work in private industries or services. Socio-cultural professionals, by contrast tend to work in public organizations or in the service sector. They are typically employed in client-interactive jobs (teachers, therapists etc.) with large work-autonomy. On the low-skilled side of the vertical axis, there is an important distinction between blue-collar workers and low service functionaries. This differentation coincides to some extent with a sectoral public-private divide; the low-skilled services are frequently employed in the public sector (personal services), whereas blue-collar workers concentrate in private crafts and industry (metal industry, chemistry, mining and construction etc.). It should be noted, however, that low-skilled service employment is also strongly represented in retail commerce, hotels and restaurants and other private services. Finally, Mixed service functionaries are a residual category;.

15

the left, but also the right. Blue collar workers in continental Europe are increasingly

likely to vote for right-wing, even far-right parties, because of their very conservative

value profile (Kriesi et al. 2008, Bornschier 2010).

Given these socio-structural changes, the left today represents a variety of social

groups with diverse preferences regarding the welfare state. The two extremes – blue-

collar workers and the new middle-classes – differ on at least three dimensions:

• Their stakes in the existing welfare state: The continental insurance schemes were

built for blue-collar workers with stable, full-time employment and a full

contribution period. Today, social risks are concentrated in the employment

categories that deviate from this standard, i.e. among individuals with atypical and

discontinuous employment biographies. These profiles are very common among

socio-cultural professionals and low service functionaries (Häusermann and

Schwander 2009). Hence, these new risk groups may want to restructure welfare

states, whereas blue-collar workers are expected to defend the status quo.

• Blue-collar workers and the new middle-class voters of the left may also differ

with regard to the level of redistribution they claim: Socio-cultural professionals

tend to be rather highly skilled. They may be less inclined to strong state

interventionism than the lower skill- and income-classes.

• Thirdly, there may be a strong value-cleavage between these groups. The “new

left” is a product of the new social movements of the 1980s (Kriesi 1999,

Kitschelt 1994), which mobilized on the basis of libertarian and universalistic

values, and which privileged policies such as (gender) egalitarianism, equal

opportunities policies etc. These policy priorities are likely to diverge from the

value-profile of the male, industrial working class. I argue that these value divides

are relevant even in welfare politics, because post-industrial social policy deals

with new social risks and social investment, which are clearly gendered, since

they affect the distribution of work and care in the families.

I contend that this restructuring of the socio-structural foundations of party systems

leads to new conflict lines, cross-cutting the old left. Post-industrial welfare politics

imply multiple policy goals and conflict dimensions, which divide actors in different

ways. Such a multidimensionality of the policy-space creates opportunities for

16

political exchange and variable actor alliances. Hence, if we want to understand why

governments tie the policy-packages that we observe, and why they manage to build

sufficient majorities for them, we need to take into account the socio-structural

foundation of the new politics of the welfare state. This argument also implies that the

restructuring of continental pension schemes is the expression of a more fundamental

restructuring of the underlying socio-structural coalitional basis of welfare state

policies.

3. Data and Methods

In order to test and illustrate my argument empirically, I analyze major pension

reforms in France, Germany and Switzerland. These three countries share both the

continental architecture of their welfare states and the structural transformations of the

labor markets in the wake of post-industrialization. Hence, I expect that the socio-

structural transformations of the policy space and the party electorates are similar.

In a first part of the empirical analysis, I investigate the socio-structural basis of

political actors in the late 1990s in France, Germany and Switzerland, by identifying

the constituencies of parties and unions. I also show the policy preference profiles of

these constituencies with regard to two dimensions of social policy: the social

insurance and redistribution (exemplifying the traditional logic of social protection,

based on income replacement and equality of outcome) and social investment

(exemplifying a typically post-industrial logic of welfare, based on employability and

equality of opportunity). These analyses are based on data from the ISSP role of

government III survey 1996.

In a second part of the analysis, I show how this electoral reconfiguration affects

policy-making, by tracing actor positions and coalitional dynamics in three major

pension reform processes of the early 2000s: the 2003 Raffarin pension reform in

France, the 2003 occupational pension reform in Switzerland and the 2001 “Riester”-

pension reform in Germany. For the analysis of these reforms, I draw on several

sources of data: the main elements of each reform have been identified through

documentary analysis (mainly governmental reports and bill proposals, as well as

17

parliamentary reports and debates) and secondary literature. I then coded the positions

of each actor on these reform elements on a scale ranging from 0 to 2. While 1 means

that the actor supports the bill proposal by the government, 0 means that the actor

favors a more generous and encompassing coverage and 2 means that the actor claims

a less generous and encompassing coverage of the risk or need at stake. The positions

of the actors have been coded with regard to four aspects of each reform-element: 1)

intervention: whether State intervention is required to resolve the problem or not, 2)

scope: who should be covered by the policy-instrument at stake, 3) level: which level

of benefits should be adopted and 4) competence: at what state level the intervention

should take place (firms, sectors, substate level…). Since all four elements are

empirically correlated (they form a single dimension in a principal component factor

analysis) the average of the four positions has then been used in the further empirical

analyses (see Häusermann 2010 for a more detailed presentation and application of

this method). As to the sources used for coding, I relied mainly on actors’ statements

in the official pre-parliamentary consultation procedures, the minutes of hearings, and

parliamentary debates8. I then complemented the coded data with more qualitative

information drawn from documentary analysis, secondary literature and interviews

with leading representatives of the social partners9. Methodologically, I use factor

analysis to analyze the dimensionality of the policy space, as well as the positions of

the actors with regard to the salient conflict dimensions.

8 For the case of France, the positions of unions and employers had to be complemented by means of interviews and archival data, since there are no regular consultations. With regard to actor selection, I have included all actors, who intervened in the consultation procedures. For the French case, I had to make a selection, since no official consultations take place. I have chosen CGT, CFDT and CGC on the side of trade unions and MEDEF and CGPME on the employer’s side. 9 France: interviews with representatives of the governmental conseil des retraites COR, the employer organizations MEDEF and CGPME, and the trade unions CGT, CGC and CFDT; Germany: interviews with representatives of the employer organizations BDA and ZDH and with the trade unions DBB, DGB, Ver.di, IG Metall and ULA; Switzerland, interviews with representatives of the ministry BSV, the employer organizations SAV and SGV, the trade union SGB and the parties CVP, FDP and SPS.

18

4. Empirical Analysis

In a first step of the empirical analysis, I analyze party electorates and the preference-

profiles of socio-economic groups by means of survey data, before then turning to the

analysis of three specific reform processes.

4.1. Changing constituencies of parties and trade unions

The main change in the restructuring of party electorates relates to the fact that left-

wing parties are not blue-collar parties anymore. Today, they also attract middle-class

voters, and have a strong female and public sector electorate. Tables 1 to 3 present

logistic regression analyses of the determinants of party choice in terms of classes and

other relevant socio-structural characteristics for Switzerland, France and Germany.

The coefficients are estimates of the odds of voting for a particular party or for being

a union member (for the party vote shares within classes, see tables TA1-TA3 in the

appendix).

The focus of the analysis is on the voting behavior of social classes. I hypothesize that

socio-cultural professionals (the new middle class) and lower service functionaries

(the new service sector working class) have become at least as likely to vote for left-

wing parties than blue-collar workers (the old working class). The shaded cells in

tables 1-3 highlight these three classes.

In Switzerland (table 1), socio-cultural professionals are even more likely than blue-

collar workers to sympathize with the left, and this difference is statistically

significant with regard to Social Democrats. More than 50% of socio-cultural

professionals express a preference for the social democratic party, as compared to

about 39% of the blue-collar workers (see table A1 in the appendix). Low service

functionaries – a class including many women and atypically employed workers – are

also 1.4 times more likely to vote for the Greens than blue-collar workers. However,

blue-collar workers are still the social class with the highest propensity towards trade

union membership. It seems that in Switzerland, the labor movement remains to some

extent the stronghold of the “old” (unionist) left. Finally, blue-collar workers are also

most likely of all classes to sympathize with the right-wing Swiss People’s Party. This

19

is the item on which socio-cultural professionals and blue-collar workers differ most

clearly: only 9.3% of the former, but almost 23% of the latter express a preferences

for the radical right.

Table 1: Party preferences of post-industrial risk groups: Switzerland

Support for the left Support for the right

Green Party

Social Democrats

Union member

Christian Democracy

Moderate right

Radical right

1.023 1.014 0.404*** 0.132* 3.581*** 0.786 Capital accumulators (0.87) (0.39) (0.13) (0.14) (1.62) (0.38)

0.699 1.061 0.760 0.724 3.184*** 1.019 Mixed service functionaries (0.44) (0.27) (0.16) (0.29) (1.26) (0.35)

1.433 2.006*** 0.908 1.248 2.637** 0.619 Socio-cultural Professionals (0.75) (0.45) (0.18) (0.42) (1.01) (0.22)

1.420 1.011 0.695 0.522 3.563*** 0.689 Low Service Functionaries (0.83) (0.28) (0.17) (0.28) (1.52) (0.30) Blue collar workers r r r r r r

Observations 1329 1329 1338 1329 1329 1329

Pseudo Rsquare 0.02 0.03 0.04 0.05 0.06 0.03

Coefficients are odds ratios. Standard errors in parentheses. *** p<= 0.01 level; ** p <= 0.05 level; * p <= 0.1 level. Controls not shown: TU membership, public sector employment, income, gender Green Party: GPS, GB; Social Democrats: SPS; Christian Democracy: CVP, EVP, CSP; Moderate right: FDP, LdU, LPS; Radical right: SVP, FPS, SD, Lega; Data source: ISSP 1996 Role of Government III. Question wording: "Generally, do you feel affiliated or sympathize with a specific political party (without necessarily being a member)?"

Table 2 displays the results for Germany, where Social Democrats have more clearly

remained a worker’s party than in Switzerland. Indeed, the left vote in Germany is

more differentiated between the different classes and parties: Socio-cultural

professionals are clearly more likely to vote for the Green Party and for the (eastern)

communist Party PDS than blue-collar workers. The odds are stronger in the case of

the communist party, but when we look at the actual percentages of people

sympathizing with these parties, it becomes clear that the German Green Party in is

the champion of the “new left”: almost 30% of all socio-cultural professionals chose

this party vs. only about 14% of blue-collar workers (see table TA2 in the appendix).

The Green Party in Germany is clearly a party with a rather high-skill electorate (the

party also receives the support of more than 20% of capital accumulators). The east-

German PDS, a Party that advocates a strong, universalistic welfare state, also

20

receives support by the socio-cultural professionals but with 6.3% mean share of the

total workforce, it remains a rather minor player.

Table 2: Party preferences of post-industrial risk groups: Germany

Support for the left Support for the right

Green Party

Communist Party

Social Democrats

Union member

Christian Democrats

Moderate Right

1.183 2.763 0.614 0.278*** 2.403** 2.068 Capital accumulators (0.53) (1.98) (0.24) (0.10) (0.88) (1.14)

1.342 0.588 1.288 0.672 1.851* 1.214 Mixed service functionaries (0.52) (0.49) (0.39) (0.20) (0.60) (0.70)

1.742 3.261* 0.662 0.373*** 0.993 2.732* Socio-cultural Professionals (0.68) (2.06) (0.22) (0.12) (0.35) (1.44)

0.546 1.511 0.799 0.525* 1.886* 1.693 Low Service Functionaries (0.30) (1.02) (0.29) (0.18) (0.68) (1.07) Blue collar workers r r r r r r

Observations 521 521 521 602 521 521 Pseudo Rsquare 0.04 0.08 0.02 0.06 0.03 0.06

Coefficients are odds ratios. Standard errors in parentheses. *** p<= 0.01 level; ** p <= 0.05 level; * p <= 0.1 level. Controls not shown: TU membership, public sector employment, income, gender Green Party: Grüne; Communists: PDS; Social Democrats: SPD; Christian Democracy: CDU/CSU; Moderate right: FDP; Data source: ISSP 1996 Role of Government III. Question wording: "If there is a general election next Sunday, which party would you elect with your second vote?"

The Social Democrats SPD have – as in Switzerland - also become a party that relies

on workers and high-skilled middle-class voters, but it seems that is has kept a more

pronounced blue-collar profile: 38% of the blue-collar workers indicate the SPD as

their party of choice, as compared to only 26% of socio-cultural professionals and

about 34% of low service functionaries10. Similarly, blue-collar workers remain much

more likely to be union members than all other classes. Almost 35% of the blue-collar

workers are unionized vs. more than 10 percentage points less for all other classes. In

sum, it seems that the left-wing electorate - composed of socio-cultural professionals,

low service functionaries and blue-collar workers - is more strongly partitioned into

different parties than in Switzerland, where these classes intermix within the social

democratic party.

10 Blue-collar workers may have stayed more consistently with the Social Democrats because there is no populist right-wing alternative in Germany (Bornschier 2010).

21

Finally, in France, the differences of voting behavior are not very strong and most of

them are not statistically significant, but precisely this is a very telling result: socio-

cultural professionals are just as likely to vote for the Social Democrats than blue-

collar workers, and they are 1.5 times more likely to sympathize with the Green Party.

The Greens have a very heterogeneous electorate in terms of socio-cultural

professionals, mixed and low service functionaries, but not blue-collar workers.

However, with regard to the Social Democrats and the Communist Party, the three

“left-wing constituencies” are more or less equally represented: about 43% of blue-

collar workers, low service functionaries and socio-cultural professionals choose the

Social Democrats and about 10-11% feel close to the Communist Party.

Table 3: Party preferences of post-industrial risk groups: France

Support for the left Support for the right

Green Party

Communist Party

Social Democrats

Union member

Centrist Right

Moderate Right

Radical Right

1.214 0.524 0.746 0.346** 3.135** 2.247 0.504 Capital accumulators (0.88) (0.35) (0.25) (0.15) (1.50) (1.72) (0.32)

1.971 0.826 0.838 0.496* 2.086* 2.428 0.163*** Mixed service functionaries (1.20) (0.41) (0.24) (0.2) (0.90) (1.69) (0.10)

1.583 0.457 1.020 1.771 2.054 2.811 0.178*** Socio-cultural Professionals (1.01) (0.24) (0.30) (0.64) (0.92) (1.97) (0.12)

3.475* 1.065 0.795 0.969 1.584 0.274* Low Service Functionaries (2.35) (0.63) (0.29) (0.47) (0.83) (0.20) Blue collar workers r r r r r r

Observations 614 614 614 653 614 555 614 Pseudo Rsquare 0.02 0.07 0.02 0.17 0.06 0.06 0.11

Coefficients are odds ratios. Standard errors in parentheses. *** p<= 0.01 level; ** p <= 0.05 level; * p <= 0.1 level. Controls not shown: TU membership, public sector employment, income, gender Green Party: Verts; Communist Party: PCF; Social Democrats: PSF; Centrist right: UDF; Moderate right: RPR; Radical right: FN; Data source: ISSP 1996 Role of Government III. Question wording: "Which political party or movement do you feel close to?"

Interestingly, the French unions enjoy more support among the socio-cultural

professionals than among workers. Over 35% of the former say they are member of a

trade union as compared to only about 20% of blue-collar workers. This result reflects

the specific structure of the weak French labor movement system, which is

fragmented in a high number of unions with a specific occupational profile. In sum,

the French left is a very heterogeneous conglomerate of different classes.

22

Most striking, however, is the strong support of blue-collar workers for the radical

right, the French National Front. Nearly 18% of blue-collar workers, as compared to

only 3% of socio-cultural professionals feel close to Le Pen’s Party. This is even

stronger than the working-class support for the radical right in Switzerland. This

tendency of working-class voters to support right-wing anti-immigrant, authoritarian

and anti-egalitarian parties tends to confirm the hypothesis that blue-collar workers

defend their privileges against new groups of potential welfare beneficiaries (Rueda

2007, Häusermann and Walter 2010).

Overall, tables 1 to 3 clearly show that left-wing parties are not strongholds of the

blue-collar working class anymore. Low service functionaries and socio-cultural

professionals – classes, which include large number of middle-class voters, women,

atypically employed and public sector employees – have emerged as equally

important constituencies. Hence, the electorate of the left has become very

heterogeneous. Its different segments are either partitioned on different left-wing

parties – Greens, Social Democrats, Communists –, or they mingle within the social

democratic movement.

I argue that the heterogeneity of the left-wing electorate confronts these parties with

considerable challenges, because the constituent classes have very different profiles in

terms of risks, preferences and values. They want different things and sometimes,

their interests are even antagonistic. This is what I show in the next step.

Figures 2 to 4 display the post-industrial classes in a two-dimensional policy space11.

The horizontal axis represents the “old” welfare state policies, focused on

11 The measurement of both axes relies on the data from the ISSP 1996 RoG III survey. The social investment dimension displays factor scores of a factor analysis of the following variables: • V28: Please show whether you would like to see more or less government spending for education.

Remember that if you say „much more“ , it might require a tax increase to pay for it. • V43: On the whole, do you think it should be or should not be the government's responsibility to

give financial help to university students from low-income families? The Social insurance/redistribution dimension displays factor scores of a factor analysis of the following variables: • V16: „What is your opinion on the statement: It is the responsibility of the government to ... reduce

the differences in income between people with high incomes and those with low incomes.“ • V23: As above, but „...to provide support for declining industries to protect jobs“ • V39: As above, but „...to provide a decent standard of living for the old.“ • V41: As above, but „...to provide a decent standard of living for the unemployed.“ • V42: As above, but „...to reduce income differences between the rich and the poor.“

23

redistribution, job protection and income replacement. The more to the left, the more

favorable the respondents are to social insurance and redistribution as the

cornerstones of the traditional welfare state. The underlying goal of these policies is a

certain equality in the distribution of resources, i.e. in outcomes. The vertical axis, by

contrast, represents attitudes concerning “new”, post-industrial social policy

orientations, labeled “social investment” (Lister 2004). Ideally, I would have

measured them with questions regarding new social risk policies (activation,

(re)training, work-care conciliation policies). Due to data availability, however, I

relied on questions concerning investment in education and financial help for

students. The higher the value, the more favorable the respondents are to those

investments, which exemplify the “new” welfare state, focused on employability, new

social risks and equality of opportunity. The literature on post-industrial social policy

making has shown that these two strands of policy (social insurance/redistribution and

social investment) target very different groups with distinctive needs and demands

(Bonoli 2005). While the traditional welfare state is built by and for the industrial

workers and their families, the social investment state targets new risk groups, such as

families, young workers and outsiders.

Figure 2: Policy preferences of post-industrial constituencies, Switzerland

24

Figure 3: Policy preferences of post-industrial constituencies, Germany

Figure 4: Policy preferences of post-industrial constituencies, France

There is a striking similarity of the location of classes in the policy-space. Three

observations are particularly relevant for this analysis: First, except for France, the

two dimensions are clearly independent. Traditional social policy divides the

25

electorate according to a logic that differs from new social risk and social investment

policies. Second, the typical left-wing constituencies (socio-cultural professionals,

low service functionaries and blue-collar workers) spread considerably across this

two-dimensional space: not only do they differ in their preferences on social

investment, but they even diverge with regard to their attitudes on traditional social

policy instruments. In all countries, the socio-cultural professionals – as the most

pronounced “new left”-constituency – position themselves more strongly to the right

than blue-collar workers and low service functionaries. They are clearly less

supportive of the traditional forms of government intervention than the old working

class (and the low-skilled in general). Third, equally - or even more - striking is the

clear-cut and strong antagonism between the positions of socio-cultural professionals

and blue-collar workers with regard to social investment. Socio-cultural professionals

consistently advocate investments in education and educational opportunities for

disadvantaged groups, a policy orientation that is close to the idea of new social risks

(Bonoli 2005), which benefit to the young, atypically employed and women.

Elsewhere (Häusermann 2010), I have shown that this difference goes together with a

strong value divide between these two classes, the socio-cultural professionals being

the champions of libertarian values (advocating gender equality and individual

choice), and the blue-collar workers being the most traditionalist group (advocating

traditional family structures and more authoritarian values) (see Kitschelt (1994) and

Kriesi et al (2008) for a detailed analysis of the two-dimensional cleavage structure of

the policy space). Their more libertarian values may be one explanation for the

preference of socio-cultural professionals for social investment, a policy that focuses

on providing equal opportunities to disadvantaged groups.

These findings show clearly that the two classes, which represent the electoral basis of

the very same left diverge very strongly when it comes to their policy preferences and

priorities. The “old” working class voters prefer traditional income replacement

policies, they are more skeptical towards social investment and have a traditionalist

value profile. The “new” middle class voters, by contrast, are quite the opposite: they

are more critical of the traditional policy strategies of the industrial welfare state, they

advocate investment and employability instead of income replacement and they

generally have a very strongly libertarian value profile.

26

However, to what extent do these differences matter for welfare politics, even more so

for pension policy, the most traditional social policy scheme of the industrial welfare

state? I contend that they do matter, and increasingly so. Issues of social investment,

gender equality, societal modernization or the valorization of atypical labor become

more and more important in welfare state reforms (Bonoli 2005, Häusermann 2010).

Hence, attitudes towards both income replacement and social investment influence the

alliances and policy-options the left can pursue, as will be shown in the following

section.

4.2. Conflict lines and political exchange in continental pension reforms

I suggest that the heterogeneity of their electorate becomes both a liability and an

opportunity for the left-wing parties in policy reforms. It may become a liability, if the

parties have to make difficult choices, privileging some constituencies over others. It

may also become an opportunity in terms of reform capacity, because the diversity

and the breadth of the interests of their electorate allow the left-wing parties to draft

new compromises and participate in a genuine restructuring of the welfare state,

rather than remaining in a purely defensive position, trying to avoid retrenchment.

The new role of the left in the formation of reform compromises appears clearly in the

three major pension reforms in Switzerland, Germany and France, which I present in

this section. In all cases of reforms, the left was split in the reform-process, some left-

wing actors supporting the reform package and others rejecting it. In most cases, the

position of the actors can be explained with reference to their electoral and

membership basis, but strategic and institutional considerations also play a role.

The Swiss reform of the occupational pension scheme in 2003 was an ambiguous

agreement (Palier 2005) that included very different reform elements. On the one

hand, mandatory occupational pension coverage should be extended to new risk

groups, mostly women and part-time employees. Also, gender equality was at stake

with the introduction of a widower’s pension along the lines of the widow’s pension.

And finally, the reform proposal included benefit retrenchment for all insured,

through a lowering of pension levels, more modest pension indexation and cutbacks

in widow’s pensions. This package thus combined different elements that catered to

very different interests and constituencies. Therefore, it is not surprising that the

27

different reform elements divided the actors along several dimensions of conflict.

Table 4 displays the results of the factor analysis performed on the coded actor

positions. The two factors show that the alignment of actors with regard to the first

factor (recalibration, the expansive issues) differed strongly from the configuration of

supporters and opponents on the second factor (retrenchment).

Table 4: Switzerland, factor analysis on the 1st reform of the occupational pension

scheme BVG 2003

Issues of the reform debate Recalibration

(F1) Retrenchment

(F2) Lowering of access threshold for occupational pensions 0.819 0.326 Special conditions for part-time workers 0.919 0.149 Introduction of widowers' pension 0.827 0.144 Ceiling of insurable income 0.787 0.376 Cuts in the level of benefits 0.243 0.826 Increase of the retirement age 0.189 0.853 Eigenvalues 2.913 1.702 explained variance 0.490 0.280 Factor analysis run on the coded positions of the actors; all factors with Eigenvalue >=1; Varimax rotation;

The two-dimensional space emerging from the factor analysis can be displayed

graphically, and all actors can be located within that space on the basis of their factor

scores. Thereby, it is possible to position the actors on both dimensions and to show

the formation of the relevant alliances. Our focus in figure 5 is on the final reform-

coalition: all actors included in the ellipse eventually gave their support to the reform

package. As can easily be seen, the left was split.

28

Figure 5 Switzerland: scatterplot of the factor scores of actors in the 1st reform of the

occupational pension scheme BVG 2003

The Green party, womens’ organizations, the Social Democratic party, and some

moderate trade unions (the CNG and the white collar union (VSA) representing a

particularly large female workforce) formed the recalibrating pole of the conflict. For

those actors, the objective of including part-time workers and women in the

occupational pension scheme became a priority, not least in terms of gender

equality12. They even accepted to support the whole reform package, including the

retrenchment elements, in order to pass the reform and save the extension of the

occupational pension scheme to new risk groups. For the blue-collar trade unions, by

contrast, the cutbacks were unacceptable. The main trade union SGB and the VPOD

refused the pension cuts categorically, and they rejected the whole reform package.

For them, the extension of insurance coverage to part-time workers and mostly female

low-income workers did not make up for the lowering of their own benefits.

12 Interviews FDP and SPS (Gutzwiller and Rechsteiner, both members of the parliamentary committee in charge of the 2003 reform of the second tier pension scheme), June 6th, 2002, Bern.

29

Hence, the reform was eventually enacted by a very large and heterogeneous majority

of left-wing parties, moderate trade unions, employers and conservative parties. The

reform was a typical example of an “ambiguous agreement”, as described by Palier

(2005): different actors agree on a reform for very different reasons. The parties of the

new left and women’s organizations accepted the reforms for the recalibrating

aspects, since they were very important to the interests and libertarian values of their

electorate. Strongly feminized classes such as socio-cultural professionals or low

service functionaries outnumber the blue-collar workers in the ranks of the left-wing

parties, and therefore the expansive aspects of the reform were privileged over the

cutbacks. The right-wing parties and employers’ organizations, by contrast, supported

the reform in order to implement retrenchment of benefits. By means of this package,

they managed to construct the large majority that is necessary for reforms in the

consensual Swiss political system.

In Germany, the left-wing parties were themselves in government when they proposed

and implemented the 2001 pension reform, a system change that transformed the

pension scheme from a single-tier public PAYG-scheme to a multipillar regime,

including a means-tested basic minimum pension, a public pension insurance pillar,

and a private capitalized pension savings scheme. Thereby the red-green government

proposed a reform that included – as in Switzerland – both cutbacks and expansive

elements: the minimum pension is an expansive reforms that benefits mostly to those

groups who are punished by the insurance-system, i.e. people with interrupted and

incomplete contribution records, atypically and precariously employed, many of them

women. Along with the minimum pension were also introduced several elements that

benefit mostly to women (educational pension credits, splitting of benefits). The

introduction of capitalized pensions – with strong state subsidies for savers - is also an

expansive reform, which focuses mostly on the middle-and higher income-classes,

who can afford saving for their own pensions. The third axis of reform, however, a

drastic retrenchment of public pension levels, mainly cut back the benefits of the old

working class, whose members are too rich to need minimum assistance, but too poor

to save on their own. These very different reform elements again gave rise to a multi-

dimensional policy space. Table 5 shows the results of the factor analysis:

30

recalibration, retrenchment and capitalization divided the actors in clearly distinct

ways.

Table 5: Germany, factor analysis of the reform of the German pension system 2001

Issues of the reform debate Recalibration

(F1) Retrenchment

(F2) Capitalization

(F3) Individualization of poverty relief 0.865 0.172 -0.051 Universal minimum pension 0.744 0.045 -0.231 Increase of educational pension credits 0.682 0.446 0.27 Splitting of benefits and contributions between spouses 0.872 -0.164 0.103 Lowering of widows' pension rights -0.165 0.926 -0.161 Cuts in the level of pension benefits 0.305 0.912 0.0013 Individual private and occupational pension savings plans -0.047 -0.97 0.948 Eigenvalue 2.649 1.956 1.064 explained variance 38% 28% 15% Factor analysis run on the coded positions of the actors; all factors with Eigenvalue >= 1; Varimax rotation;

I can only represent two dimensions meaningfully in figure 6. Therefore, this figure

shows the configuration of actors with regard to recalibration and retrenchment.

Actors within the ellipse – except for the FDP - supported the reform in the final vote.

Figure 6 Germany: scatterplot of the factor scores of actors in the 2001 reform of the

basic public pension scheme

31

Again and as expected, the Green Party (the most clearly “new left” actor) turns out as

the most ferocious advocate of recalibration. The SPD took a more favorable position

on recalibration than the average union. However, the Green Party and the Social

Democrats had shifted considerably to the right with regard to the retrenchment

dimension and advocated heavy cuts. This led to a clear rift between the unions and

the left-wing parties over the cutbacks. Figure 6 also shows that the Christian

Democrats (CDU/CSU), family organizations, and the small business employers

advocated conservative reforms on recalibration. Indeed, the red-green government

created incentives for mothers to remain active in the labor force. The conservative

actors rejected this dimension of the reform, because it would call into question the

traditional organization of families.

The Green Party and the employers clearly approved of the reform package, whereas

some trade unions (IG Metall, DGB), the welfare organizations of the civil society,

and the PDS rejected it. In between are the unions DAG, and IG Chemie, which

criticized retrenchment heavily, but eventually did not mobilize against the reform.

The SDP approved of the reform, but it was internally split. Finally, for the employers

(such as BDA), the reform was acceptable, because the savings it entailed outweighed

the costs implied by recalibration. Indeed, the main employers organization, the BDA,

stated that the recalibrating elements were “absolutely plausible” (“durchaus

nachvollziehbar”13).

Again, we can make much sense of these party positions when looking at their

electorates and constituencies. The blue-collar trade unions could not agree on the

reform, because their constituencies were the main losers of the reforms. White-collar

unions with more skilled members (IG Chemie) or more female members (DAG), by

contrast, could also refer to the expansive reform elements as a (partial) compensation

of the cutbacks. Similarly, the Green Party, which is only marginally rooted in the

blue-collar workforce, privileged recalibration and capitalization over retrenchment.

The only puzzle is the position of the SPD, who still represents a large and strong

blue-collar constituency. Indeed, the party was deeply torn on the reform between

their “old” and “new” left wings. At the time of the reform, the “new left” elite, who

wished to become more attractive to the new middle-classes, prevailed in the

13 Written statement of the BDA in the public hearing before the parliamentary committee, 8.12.2000, Ausschussdrucksache 14/1090: p. 196.

32

government. But eventually, these reforms led to an alienation of the blue-collar

workers from the SPD and to the formation of a new left-wing alternative, the

“Linkspartei” (Picot 2008).

For the case of France, we look at the 2003 pension reform that was proposed and

implemented by the conservative Raffarin-government. Again, it included a range of

very different reform elements. On the one hand, the government proposed to lower

the indexation of pensions and widow’s pensions in the main public pension pillar. On

the other hand, it also included expansive elements, such as an increase in the

minimum pension, more generous pensions for workers with long and precarious

careers, the increase of educational pension benefits for public servants and –

similarly to Germany – the introduction of individual capitalized pension savings

plans. In addition, the reform proposal also included a certain harmonization of

benefits in the public and private sectors. Again, the diversity of these elements

divided the actors along three distinct dimensions of conflict, as seen in Table 6.

Table 6: France, factor analysis on the "Raffarin" pension reform 2003

Issues of the reform debate

Recalibration/ Capitalization

(F1) Retrenchment

(F2)

Educational pension

credits (F3) Harmonization of the required contribution periods in public/private sectors 0.909 0.247 0.041 Lowering of retirement age for long career workers 0.838 0.225 0.386 Individual pension savings plans 0.829 0.367 -0.173 Increase of minimum pension 0.786 0.177 0.518 Lowering of widows' pensions 0.488 0.82 0.224 Indexation of pensions on prices 0.195 0.946 0.19 Increase of educational pension credits for civil servants 0.073 0.216 0.932 Eigenvalues 3.11 1.89 1.4 explained variance 44% 27% 20% Principal component factor analysis run on the coded positions of the actors; all factors with Eigenvalue >=1; Varimax rotation;

A first factor is composed by elements of recalibration and capitalization, whereas the

second factor represents the configuration of opponents and supporters with regard to

retrenchment. Finally, educational pension credits do not fit in with either of the other

33

issue categories and form a third factor. Since the latter is a rather minor element, I

only display the first two factors in figure 7.

Figure 7 France: scatterplot of the factor scores of actors in the “Raffarin” reform of

the public pension scheme 2003

On the horizontal axis, figure 7 shows the alignment of actors with regard to the

cutbacks of benefits. The conservative parties, employers’ organizations, but also

representatives of the Socialist Party stressed the need for “financial consolidation” of

the pension scheme. The turn of the French Socialist to more right-wing positions on

pension cutbacks may be related to the fact that they mobilize equally well within the

new middle-class (socio-cultural professionals) than within the blue-collar workers.

The trade unions, however, were all similarly opposed to the cutbacks, defending the

main public pension insurance regime. However, the left became deeply divided on

the second axis, relative to recalibration (e.g. minimum pensions) and capitalization

(individual pension savings plans): while the old blue-collar union CGT and the

French Communist Party rejected these reform elements, more moderate trade unions

such as CFDT and CGC were much more in favor of these reforms. The distinct

34

profile of their membership explains this divergence: CFDT mobilizes strongly in the

service sector, with white-collar and female workers. And CGC is a rather high-skill

union of service and public sector workers. These constituencies belonged to the

beneficiaries of the expansive reform elements, while the traditional blue-collar

constituencies did not. Hence, CFDT and CGC accepted a reorientation of the system

towards a more redistributive and targeted coverage of particular risk groups, such as

low-income workers, and a more egalitarian benefit structure between public and

private sectors. Thereby, the conservative government was able to divide the labor

movement on this reform, compensating the CGC and CFDT for the cutbacks. By

mitigating the labor protests against the reform, it could be implemented with the

support of a heterogeneous cross-class coalition.

One word needs to be added with regard to the interpretation of the location of the

Communist and Socialist Parties. Both represent blue-collar constituencies as well as

more middle-class voters, but remained firmly opposed to the reform, even though

part of their electorate could have benefited from it. Their opposition must, however,

also be seen in the light of the French majoritarian institutional framework:

Opposition parties consequently have to oppose all policies proposed by the

government, regardless of the reform content. Hence, the exclusion of the left-wing

parties from the reform-coalition is partly an effect of institutions and electoral

strategies, rather than of interest-representation.

In sum, the policy reform space in all three countries has clearly become

multidimensional. In addition, the left was split on the reform packages in all

countries. To a large extent, this split seems to coincide with the heterogeneity of

interests and constituencies that the different left-wing political parties and trade

unions represent. All Social Democratic and Green parties have become more open to

benefit cutbacks, a finding that coincides with the increasingly middle-class profile of

their voters. In addition, they privilege reform elements, which focus on new risk

groups, women, atypical workers, part-time employees or – with regard to

capitalization – middle-and higher income-classes. Depending on the set-up of the

reform package, these concerns outweigh the interests of their “old” constituency, the

blue-collar workers. Trade unions – especially in Switzerland and Germany – remain

more close to the interest of the standard male industrial worker, but the interests of

35

different unions have also become heterogeneous and in each of the three reforms

analyzed, parts of the trade unions have participated in the reform-coalitions.

Conclusion

In this contribution, I showed that recent welfare state reforms in Switzerland,

Germany and France were the result of carefully drafted reform packages, which

comprise several dimensions of reform and conflict. Governments tied packages

including both pension benefit retrenchment and expansion, thereby splitting the left,

and constructing the required majorities for reform. In this interpretation, I agree with

the recent literature that explains welfare reforms as “modernizing reforms”,

“virtuous” compromises or strategies of political exchange (Levy 1999, Bonoli 2001,

2005, Natali and Rhodes 2004b). However, I argued in this paper that these reform-

packages are not arbitrarily designed by heroic governments or by strategic policy

entrepreneurs. Rather, they are linked to the interests and values of party and trade

union constituencies. Governments do not primarily succeed in implementing reforms

by framing retrenchment as necessary, by convincing voters of the needs for cutbacks,

by hiding reform consequences, or by constructing “virtuous” reforms that avoid any

distributional conflicts. Rather, they cut back benefits for some constituencies but not

for others, and they grant new benefits to clearly identifiable constituencies: there is a

socio-structural basis to the positions political actors take in the policy space and to

the kind of compromises they are willing to participate in.

In the Swiss case, the Social Democrats, Green Parties and some white collar and

service sector-trade unions participated in a reform that granted occupational pension

coverage to women and part-time workers, while at the same time cutting back the

benefits in the standard insurance scheme. In Germany, the red-green government

devised a reform which improves pension rights for the most precarious risk groups

(women, atypically employed, people with incomplete contribution records) and the

middle- and higher income levels (through capitalization), while cutting back pension

entitlements of the standard (middle-class) workers. And in France, white-collar,

high-skill and service-sector unions supported a reform by the conservative

government, which included expansive elements for a more needs-based system with

a complement of private pension savings, while cutting back benefit levels in the main

36

public pension insurance scheme. In each case, the positions of the left-wing actors

supporting the reform-packages can be related to the changing socio-structural basis

of these actors. In Switzerland, Germany and France, the left today relies as much on

socio-cultural professionals and low service functionaries than on the blue-collar

workforce. These new constituencies include middle-class and high-skilled workers,

many women, most of them part-time or atypically employed, and public sector

workers. They have different interests and different values than the old working class,

and they do not belong to the range of core beneficiaries of the old insurance welfare

state. Hence, when confronted with the choice between the defense of the status quo

and a restructuring of the pension regime, they may privilege the latter, and so do

(part of) their representatives in the policy-making process.

In the theoretical part of this paper, I have argued that all four existing explanations of

the “unfreezing” of continental welfare states leave important questions unanswered.

In conclusion, I would like to propose an answer to these questions from the

perspective I have developed in this contribution. Firstly, the obfuscation argument

cannot explain why governments can “hide” retrenchment. Why are there no

opposition parties, no media, no trade unions or independent experts spelling out the

distributional implications of the reforms publicly? Similarly, the framing argument

implies that governments convince voters of the necessity of retrenchment. But it

lacks a theorization of the responses of those to whom this discourse is directed. Why

would the “losers” of reforms adhere to such a discourse? And why would the same

discourse convince such a diversity of addressees? My answer to both questions is

similar: voters are neither blind, nor ignorant or easy to convince: quite contrarily, the

collective actors and the voters do understand the distributional implications of the

reforms. However, the reforms do not include retrenchment only, and the cutbacks

included in the reforms do not hurt all voters equally. Rather, the reforms have

different distributional implications for different groups of voters, and pension politics

is more about power than about discourse. Overall, the old beneficiaries of the

industrial welfare state are among the main losers of recent pension restructuring. But

many new risk groups, women, middle- and higher income earners tend to see their

pension rights stabilized or even improved. For them, the expansive elements

37

outweigh the cutbacks, and this accounts for the formation of (very heterogeneous)

coalitions supporting these reforms.

The “Nixon goes to China”-argument may successfully explain why some left-wing

governments could afford taking some blame for retrenchment, but it has no

explanation as to the actual motivations of these governments to retrench or

restructure. Why would Social Democrats cut back pensions? Similarly, the package-

deal literature does not answer the question how governments, who draft modernizing

compromises can gain the necessary majorities for their reforms. My answer lies in

the transformed electoral basis of these parties and in the distributional consequences

of their reforms. Left-wing governments do retrench existing benefits, because the

beneficiaries of the status quo are not their only, and in some countries not even their

most important constituency anymore. The new left-wing electorate may even be

penalized by the old “industrial” PAYG-insurance scheme (many women and service-

sector workers do not have complete contribution-periods), or it may simply be more

interested in certain forms of private savings (as for the middle- and higher income

classes). Hence, for the new constituencies of the left, it may make sense to

restructure the pension regime, transforming it from a public “bismarckian” insurance

scheme into a multi-pillar system combining minimum-rights, public insurance and

private capitalization. In addition, the new left electorate holds strongly libertarian

values, which collide with the industrial insurance scheme that privileges the male

standard worker and stable family relations. Gender equality in the pension scheme, a

more egalitarian benefit structure, or targeted benefits for new risk groups are

important demands for these constituencies.

This reasoning implies that the post-industrial welfare state that emerges from the

reforms of the last decades may differ from the old industrial welfare state not

primarily for functionalist (problem-pressure) or ideological reasons (neoliberalism),

but rather because the post-industrial society is different from the industrial society.

Socio-structural change affects political parties and interest organizations, and thereby

it affects policy-making. This is why I would argue that welfare state research needs

to pay more attention to electoral and socio-structural dynamics, which have so far

been mainly the subject of other research fields such as party system research or class

analysis. To be clear, the positions of political parties and interest organizations

cannot be inferred directly from the preferences and values of their constituencies.

38

This transmission is both imperfect and bi-directional. However, if we neglect the

socio-structural foundations of collective interest representation, we may develop a

conceptualization of policy-making that becomes too voluntaristic and detached from

actual societal change.

39

Appendix

Figure A1: Classification of occupations in post-industrial class groups

based on Kitschelt and Rehm (2005: 23

Independent work

logicTechnical work logic

Organizational work

logic

Interpersonal work

logic

Technical experts

(CA) 21 Physical, mathematical

and engineering science

professionals

Higher-grade

managers (CA) 11 Legislators and Senior

officials

12 Corporate Managers

Professional/

managerial

Technicians (MSF) 31 Physical and

engineering science

associate professionals

Associate managers

(CA) 13 General Managers

Associate

professonal /

managerial

Petty bourgeoisie

without employees

(MSF) Self-employed >24

Skilled crafts (BC) 71 Extraction and building

trades workers

72 Metal, machinery and

related trades workers

73 Precision, handicraft,

printing and related trades

workers

74 Other craft and related

trades workers

Generally /

vocationally

skilled

Routine operatives

and routine

agriculture (BC) 61 Market-oriented skilled

agricultural and fishery

workers

92 Agricultural, fishery and

related laborers

81 Stationary-plant and

related operators

82 Machine operators and

assemblers

83 Drivers and mobile-

plant operators

93 Laborers in mining,

construction, manufacturing

and transport

Low/ un-skilled

Two-digit numbers in front of job descriptions are ISCO88-2d codes.

Socio-cultural semi-

professonals (SCP) 22 Life science and health

professionals

23 Teaching professionals

24 Other professionals

32 Life science and health

associate professionals

33 teaching associate

professionals

34 Other associate

professionals

Large employers, self-

employed

professionals and petty

bourgeoisie with

employees (CA) Self-employed <=24

Skilled office workers

and routine office

workers (MSF) 41 Office Clerks

42 Customer Service Clerks

Skilled service and

routine service (LSF) 51 Personal and protective

services workers

52 Models, salespersons and

demonstrators

91 Sales and services

elementary occupations

40

TA1: Party vote shares of post-industrial classes: Switzerland Support for the left Support for the right

Green Party

Social Democrats

TU member

Christian Democracy

Moderate right

Radical right

Capital accumulators 9.59% 35.62% 13.07% 8.22% 28.77% 17.81% Mixed service functionaries 6.59% 32.97% 15.84% 13.19% 23.63% 23.63%

Socio-cultural professionals 7.59% 51.79% 25.84% 14.29% 16.96% 9.38%

Low service functionaries 10.67% 42.67% 16.67% 10.67% 24.00% 12.00%

Blue collar workers 6.12% 38.78% 27.08% 21.43% 11.22% 22.45% Mean share in workforce 7.67% 41.72% 20.69% 13.96% 20.09% 16.56%

Number of observations 652 652 1634 652 652 652

Notes: Values are the percentage of people in a particular class choosing this party / being a union member (among the respondents who indicated a party preference). Green Party: GPS, GB; Social Democrats: SPS; Christian Democracy: CVP, EVP, CSP; Moderate right: FDP, LdU, LPS; Radical right: SVP, FPS, SD, Lega; Data source: ISSP 1996 Role of Government III. Question wording: "Generally, do you feel affiliated or sympathize with a specific political party (without necessarily being a member)?"

Table TA2: Party vote shares of post-industrial classes: Germany

Support for the left Support for the right

Green Party

Communist Party

Social Democrats

Union member

Christian Democrats

Moderate Right

Capital accumulators 21.31% 5.46% 19.67% 15.94% 40.98% 12.57%

Mixed service functionaries 16.67% 5.24% 27.14% 21.79% 38.57% 12.38%

Socio-cultural Professionals 29.65% 8.41% 26.11% 24.39% 23.89% 11.95%

Low Service Functionaries 12.10% 6.45% 33.87% 22.58% 39.52% 8.06%

Blue collar workers 13.88% 6.05% 38.08% 34.78% 35.23% 6.76% Mean share in workforce 19.04% 6.35% 29.39% 25.18% 34.96% 10.25%

Number of observations 1024 1024 1024 822 1024 1024

Notes: Values are the percentage of people in a particular class choosing this party / being a union member (among the respondents who indicated a party preference).

Green Party: Grüne; Communists: PDS; Social Democrats: SPD; Christian Democracy: CDU/CSU; Moderate right: FDP;

Data source: ISSP 1996 Role of Government III. Question wording: "If there is a general election next Sunday, which party would you elect with your second vote?"

41

Table TA3: Party vote shares of post-industrial classes: France

Support for the left Support for the right

Green Party

Communist Party

Social Democrats

Union member

Centrist Right

Moderate Right

Radical Right

Capital accumulators 4.91% 4.91% 35.58% 16.75% 17.18% 28.22% 9.20% Mixed service functionaries 9.22% 9.71% 42.23% 13.85% 11.65% 21.84% 5.34%

Socio-cultural Professionals 8.76% 10.36% 43.82% 35.40% 13.94% 19.92% 3.19%

Low Service Functionaries 10.84% 9.64% 42.17% 12.61% 9.64% 19.28% 8.43%

Blue collar workers 3.70% 11.85% 42.96% 19.19% 7.41% 16.30% 17.78% Mean share in workforce 7.52% 9.31% 41.53% 21.22% 12.53% 21.36% 7.76%

Number of observations 838 839 840 1037 844 845 846

Notes: Values are the percentage of people in a particular class choosing this party / being a union member (among the respondents who indicated a party preference). Green Party: Verts; Communist Party: PCF; Social Democrats: PSF; Centrist right: UDF; Moderate right: RPR; Radical right: FN; Data source: ISSP 1996 Role of Government III. Question wording: "Which political party of movement do you feel close to?"

42

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