An Asset Theory of Social Policy Preferences

• Published in: The American political science review 2001-12, Vol.95 (4), p.875-893
• Main Authors: Iversen, Torben, Soskice, David
• Format: Article
• Language: English
• Subjects: Crossnational Differences; Employment; Governance; Government spending; Home ownership; Human capital; Income taxes; Insurance; Investment income; Investments; Job loss; Labor markets; Labor Policy; Level of education; Political parties; Political science; Preferences; Public opinion; Risk aversion; Skilled workers; Skills; Social Policy; Social security; Social theories; Spending; Tax rates; Trade policy; Unemployment; Work Skills; Workers
• ISSN: 0003-0554; 1537-5943
• DOI: 10.1017/S0003055400400079

We present a theory of social policy preferences that emphasizes the composition of people's skills. The key to our argument is that individuals who have made risky investments in skills will demand insurance against the possible future loss of income from those investments. Because the transferability of skills is inversely related to their specificity, workers with specific skills face a potentially long spell of unemployment or a significant decline in income in the event of job loss. Workers deriving most of their income from specific skills therefore have strong incentives to support social policies that protect them against such uncertainty. This is not the case for general skills workers, for whom the costs of social protection weigh more prominently. We test the theory on public opinion data for eleven advanced democracies and suggest how differences in educational systems can help explain cross-national differences in the level of social protection.