4 Cracks in the Foundation. Retrenchment in Advanced Welfare States

In this article, we shed new light on the question of the degree to which welfare retrenchment has taken place. Using disaggregated data in four spending categories over almost three decades, we show that most countries still spend more today than in 1980, but less than at the peak. While absolute retrenchment below the 1980 level is rare, relative retrenchment is very frequent. At the same time, the deepest cuts have taken place in those areas that most reduce inequality. We document a shift in spending from the working-age population to pensions, on one hand, and services on the other. In many instances, welfare state retrenchment has been most pronounced in the most generous welfare states of Scandinavia and continental Europe. Taken together, our findings show that social spending has not been immune to retrenchment, as “New Politics ” authors have suggested. With hindsight, the 1990s can be identified as a turning point when welfare state expansion came to an end, ushering in a phase of retrenchment.