Employers and Cost Allocation for Welfare State Development

A Comparative Analysis of Unemployment Benefits in Interwar Europe

Abstract

Welfare states vary widely in the manner in which they choose to allocate the burden of unemployment benefits among workers, employers, and public authorities. This article challenges the explanations of labor market policy pushed forward by the power resource theory, varieties of capitalism, and insider-outsider theory, and presents a novel explanation for the causes of cross-national variations in the cost-sharing patterns of indemnification granted in the case of unemployment. Based on a comparative historical analysis of unemployment insurance development in interwar European countries, the author argues that pathdependent social policy institutions are the best explanation for the allocation of unemployment insurance costs. Questions of how the social programs were structured（along citizenship or occupational lines）in the early 20th century and whether the organization of unemployment funds was exclusively in the hands of trade unions were the key factors that determined the patterns by which the burden of insurance was shared among the workers, employers, and public authorities. The article shows that countries like France, which have adhered to the fragmented unemployment fund schemes, retained the old voluntary systems, where the burden of insurance was borne entirely by the workers. However, in countries where the unemployment funds were constituted solely by labor unions, such as Germany, it required employersʼ participation in the compulsory unemployment insurance to overcome the neglect of unorganized workers after World War I.