Business Interests and the Costs of Welfare State Development

This paper analyses business attitudes towards the twentieth century development of the main social insurance programs in the Netherlands (e.g. those related to unemployment, sickness/disability, and old age). The paper argues that Dutch business group attitudes towards the welfare state expansion mainly rested on the consequences of this for (1) the reservation wage, (2) labor costs, and (3) private investment. It finds no evidence of business support for welfare state expansion based on the expectation that (some) firms were to derive economic benefits from this. It furthermore shows business’ willingness to support and ability to oppose demands for increases in the generosity of social protection varied greatly depending on labor’s willingness to accept that social policies are part of the social wage and should therefore be financed out of the margin for pay increases. Finally, it argues that this willingness in turn depended on the type of labor market risks against which workers were to be insured, the margin for pay increases, and the extent to which social welfare initiatives were perceived as actual improvements to the social wage.