A defining characteristic of the Scandinavian countries is their universal welfare states with high levels of spending and redistribution from the rich to the poor. It is well-established that universal welfare programs create a high level of support for the welfare state among the middle class. Because of the electoral importance of the middle class, politicians have been keen to expand universal welfare programs, which not only are highly appreciated by this class, but paradoxically also turn out to reduce poverty and inequality very efficiently. The tight political bond between the middle class and the less-well off underpins universalism and is the most distinctive feature of the Scandinavian welfare states.
Recently, however, two surprising developments have surfaced. First, post-tax and transfer inequality has been rising faster in Denmark than anywhere else in the OECD, while remaining stable in Sweden and significantly dropping in Norway. Second, while the welfare state remains popular, a series of reforms, especially in Denmark, has changed some of the core social policies in a much less universalist direction. Programs aimed particularly at the poor and disadvantaged have been cut, while programs enjoyed by the middle class have been expanded. None of these developments are expected by the conventional wisdom on the Scandinavian welfare states.
We know that the middle class has been pivotal in universal welfare states and our leading hypothesis is that the historical coalition between the middle and working classes (manifested in parliamentary coalitions between parties representing the two groups) has changed. We propose and test two new hypotheses about why the middle class has changed its preferences about the welfare state more decidedly in Denmark than in Norway and Sweden. First, we expect that the much higher saliency of the immigration issue in Denmark plays a role. With ethnic divisions becoming more important, the social affinity between classes decreases with significant negative consequences for the welfare state. Second, we conjecture that the financial and economic crises have hit Denmark considerably harder than Norway and Sweden. This has made tough prioritization between social programs inevitable. We expect that parties catering to the middle class advocate retrenchment of programs predominantly aimed at the poor in order to protect programs popular among the middle class.
