Bringing Labor Back In: Varieties of Unionism and the Evolution of Employment Protection and Unemployment Benefits in the Rich Democracies By Joshua C. Gordon A thesis submitted in conformity with the requirements for the Degree of Doctorate of Philosophy Graduate Department of Political Science University of Toronto © Copyright by Joshua C. Gordon (2012) Bringing Labor Back In: Varieties of Unionism and the Evolution of Employment Protection and Unemployment Benefits in the Rich Democracies Joshua C. Gordon Department of Political Science, University of Toronto Doctor of Philosophy, 2012 Abstract This thesis looks at the politics of labor market policy in the postwar period in the advanced industrialized democracies. Specifically, the dissertation seeks to explain stark cross-national differences in unemployment benefit systems and employment protection legislation. The theory advanced in this thesis emphasizes significant differences in union organization across the rich democracies. This view, “Varieties of Unionism”, shows how the varying political capacities and policy preferences of labor movements explain most of the cross-national policy differences. In particular, the research points to union movements’ ideological traditions and varying rates of union density, union centralization, and involvement in unemployment benefit administration as crucial explanatory forces. Each feature of union movements captures an important part of why they might choose to advocate on behalf of the unemployed and to their differential ability to have those policy preferences realized, as well as indicating the kinds of preferences they will have for employment protection legislation. In the case of policies directed at the unemployed (or so-called labor market ‘Outsiders’), these insights lead to the construction of an index of “Outsider-oriented Unionism”, which correlates very closely to cross-national variations in unemployment benefit generosity as well as to active labor market policy spending. The thesis also introduces a new fourfold typology of unionism that helps to explain the different combinations of employment protection legislation and ‘Outsider policy’ generosity that exist among the rich democracies, or labor market policy ‘regimes’. The thesis makes this argument with multiple regression analysis of fifteen rich democracies and with detailed historical case studies of Britain, The Netherlands, and Sweden. In making this case, the thesis strongly challenges the explanations of labor market policy put forward by the Varieties of Capitalism literature and Insider-Outsider theory. In addition, the thesis reformulates the traditional Power Resource view by introducing a more rigorous theory of labor movements’ policy preferences and thereby qualifies recent statements that have emphasized partisanship almost alone. Most broadly, the theory challenges the “individualist turn” in recent comparative political economy scholarship and suggests that the field needs to return its gaze far more toward organized interests. ii Acknowledgements This thesis drew on the energy, resources and knowledge of a large number of people. I have many people to thank and I apologize if I exclude anyone through forgetfulness. Foremost among the people I must thank is my supervisor, Rodney Haddow, who was unstinting in the support and advice he provided me. He read each and every draft of different parts of this work and without exception provided prompt, detailed feedback. More importantly, he helped me to frame the project and made sure that I did not chase dead-ends. His knowledge of the comparative political economy literature and its statistical techniques were invaluable. I owe him a great deal for all the help he has given me, including a few well-worn books that I have borrowed along the way. John Myles and Louis Pauly, as committee members, also provided a wealth of knowledge and wisdom to help guide the project. Each has a panoramic view of their respective fields, Sociology and Political Science, and this was of immense use to me, especially as I move toward publications. Both also provided great feedback on various drafts, in sometimes different though complementary ways: from rigorous copy editing and framing advice to reading recommendations and incisive critiques. Not least among their contributions, both provided the encouragement and praise required to keep my spirits up and my motivation strong. In addition to these three core members of the committee, I must also thank the many others who at one point or another were at the Department of Political Science at the University of Toronto and who contributed to the work herein. In alphabetical order, a provisional list would include: Christian Breunig, Lilach Gilady, Randall Hansen, Jeffrey Kopstein, Erick Lachapelle, Matthew Lesch, Andrew Macdougall, Neil Nevitte, Cliff van der Linden, and Joseph Wong. From reading drafts to just being there to bounce ideas off, they have contributed in many ways to this project. Furthermore, many of the conversations I had during my fieldwork shaped the theory and work developed here, though of course none bear responsibility for any mistakes or poor judgment on my part. Some of these were interviews with people I promised to keep anonymous, so this is a general thank you to all of them. Some of the others I hope will not mind being mentioned here. They were: Brian Burgoon, Eero Carroll, Paul de Beer, Jonathan Hopkin, Kees van Kersbergen, Mark Wickham-Jones, and Jaap Woldendorp. Lastly, I want to thank all of my family and friends who have supported me along the way. You know who you are, so I will not compose a long list. There are two sets of people I want to single out, though. One is the wonderful girlfriend I had through much of this process, Nicole Shaffer. She, along with Korlee, provided a great escape from the stresses of the dissertation. I thank her for all the patience she displayed when my work interfered with our relationship. The other people I must thank, and to whom I owe it all, quite literally, are my parents, Rick Gordon and Judith Neamtan. They have provided me with enormous support throughout my life and throughout the thesis, in every possible way I could have asked for. Indeed, it was our dinner conversations that motivated my interest in politics and that generated this project. Their love, encouragement and support have made this project possible and I dedicate the thesis to them. iii Table of Contents Chapter 1: Introduction: The Political Economy of Employment Protection and Unemployment Benefits in the Advanced West Chapter 2: Bringing Labor Back In: Varieties of Unionism and the Political Economy of Labor Market Policy Chapter 3: Quantitative Evidence for Varieties of Unionism Chapter 4: Business Unionism, ‘Voluntarism’ and the Evolution of Labor Market Policy in the UK Chapter 5: Encompassing Unionism and the Evolution of Labor Market Policy in Sweden Chapter 6: Social Partner Unionism and the Evolution of Labor Market Policy in The Netherlands Chapter 7: Conclusion Works Cited iv Chapter 1: Introduction The Political Economy of Employment Protection and Unemployment Benefits in the Advanced West 1 Section I: Research Questions and Justification Directly or indirectly, national labor market policies have a major impact on the lives of most citizens in the advanced industrial world.1 The vast majority of citizens in these countries will enter the labor market at some point in their lives and most spend a large portion of their lives in it. The regulations, benefits and incentive systems that affect that market therefore matter a great deal, not least in political terms. Labor market policy encompasses a broad spectrum of state actions which directly influence the buying and selling of labor power. These include working time regulations, minimum wage requirements, training and job-search arrangements, statutory hiring and firing rules, and financial assistance to the unemployed (i.e., those without employment but actively looking for it). The focus of this thesis is on the last two areas of labor market policy listed above, what are known as employment protection legislation (EPL) and unemployment benefits (UB). Both provide crucial foundations to contemporary labor markets in advanced industrial countries. The thesis explores the politics behind their evolution over the course of the postwar period and especially during the past thirty years. Why have certain countries developed extensive, strict statutory regulations regarding dismissal, while others have only minimal statutory constraints on dismissal? Why do some countries have unemployment compensation systems that provide high levels of wage replacement to large numbers of the unemployed, while others provide only meager assistance to a small portion of the unemployed? What political and economic factors determine the placement of countries between these very different policy outcomes? To what extent and in what ways do policies in these two areas interact with each other? And why have some countries, in the face of globalization and other pressures, maintained the labor market protections established in the postwar period while others have experienced significant deregulation or retrenchment? These are the main questions that this thesis seeks to answer. My answers to these questions are complex and multifaceted. Political outcomes are the product of a wide range of historical forces, including incalculable chance. Very rarely if ever is there a simple explanation