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Description
Introduction
Since the 1980s, much has been written about the impact of fiscal austerity and free market ideas on social policy reform in advanced industrial societies. One of the most central issues debated in that comparative policy literature is the scope of policy change possible in the context of enduring institutional constraints. According to Paul Pierson (1994), the expansion of the modern welfare state during the postwar era favored the emergence of large constituencies and powerful vested interests that have prevented right-wing actors to "dismantle the welfare state." In recent years, scholars have argued that despite such institutional constraints, much policy change has occurred in advanced industrial welfare states (e.g., Hinrichs & Kangas, 2003; Streek & Thelen, 2005). In this debate about policy change, one of the key issues at stake is the relationship between public and private benefits (Beland & Hacker, 2004; Hacker, 2002; Howard, 1997). Writing about the United States, Jacob Hacker has explored the incremental transformation of private benefits in a context of economic and social change. For him, incremental change in the private sector can significantly reduce the level of protection offered to workers despite the absence of major, direct cutbacks in public pensions and health benefits (Hacker, 2004).
In the context of this growing scholarship on policy change and the relationship between public and private benefits, detailed comparative analysis is needed to evaluate the scope and the mechanisms of policy change in countries where private social policy is a major source of economic security for workers and citizens. This article offers a systematic comparative analysis of policy changes that have affected the nature and the balance between public and private pension benefits in four advanced industrial countries since the 1970s: the United States, Canada, Britain, and Japan.
Three main factors guided the selection of these cases. The first factor (i.e., heavy reliance on private benefits) points to a major characteristic the four cases share; the two other factors (i.e., political institutions and policy ideas) stress key differences between the cases. First, as far as the policy landscape is concerned, all four countries rely extensively on private pensions. Belonging to the liberal welfare regime and offering comparatively modest public pensions, the first three countries (i.e., the United States, Canada, and Britain) are legitimate cases for such a comparative analysis as they have long featured an extended role for private pension benefits (Esping-Andersen, 1990; Myles, 1989). Moreover, these countries have modest earnings-related public pension schemes that are meant to complement private benefits. Although it possesses Bismarckian, occupationally fragmented schemes, Japan has much in common with the United States, Canada, and Britain. This is largely true because Japan, as the other three countries, features a combination of comparatively modest earnings-related public pensions and well-developed private benefits. Such common ground suggests that Japan is comparable to the three liberal countries analyzed here. Furthermore, since the mid-1980s, when it began cutting public pension benefits and overcoming institutional fragmentation, Japan has shifted considerably toward the liberal welfare regime. Overall, what Japan and the three other countries have in common is the combination of earnings-related public pension schemes with a large-scale network of private pension benefits. Second, when political institutions are considered, two of the four countries are federal systems (the United States and Canada) where power is much more fragmented than in the two other countries (Britain and Japan). (1) Beyond the issue of federalism, checks and balances further increases power fragmentation in the United States. Third, at the level of policy ideas, the radical free market agenda is much less present in Canada and Japan than in Britain and the United States. Overall, these four countries share basic policy characteristics, yet major institutional and ideological differences exist between them.
This article explains why the United States, Canada, Britain, and Japan have taken contrasting paths toward restructuring of the public-private dichotomy in pension policy. Starting from the analytical distinction between two patterns of policy change (i.e., policy drift and legislative revision), the study finds that the four countries fall into two distinct clusters: Canada and the United States, which have mainly witnessed policy drift, and Britain and Japan, which have reshaped their pension systems largely through legislative revision. (2) The last section explains the differences between and within these two country clusters. The article concludes that institutional forces explain the distinctive policy patterns between the two country clusters but that it is necessary to bring in other factors (i.e., demographic aging, union density, and the role of ideas) to account for major differences within each of these clusters.
Patterns of Policy Change: Policy Drift and Legislative Revision
During the 1990s, a common wisdom emerged in the literature about "the new politics of the welfare state." According to this common wisdom, the postwar expansion of the welfare state created powerful forces that have prevented overtly conservative politicians like Margaret Thatcher and Ronald Reagan to "dismantle the welfare state" (Pierson, 1994). Although external shocks can profoundly alter the course of a policy's development, the expansion of social programs favored the emergence of powerful economic and political constraints, such as constituencies and transition costs, making path-departing reforms unlikely (Pierson, 1996). Ultimately, these feedback effects from existing social programs lead to the enactment of path-dependent changes that seldom depart from existing institutional logics.
What is most hotly debated in the current social policy literature is the frequency of path-departing processes and the conditions under which comprehensive policy change occurs. This is largely true because the literature on path dependence and the "frozen" welfare state (Esping-Andersen, 1996) cannot account for policy transformations that emerge as the cumulative result of incremental changes (Hinrichs & Kangas, 2003; Thelen, 2004).
In recent years, the issue of policy change has moved toward the center of the debate over social policy development in advanced industrial societies (Hacker, 2004; Pierson, 2004; Streek & Thelen, 2005; Thelen, 2004). Perhaps the most innovative contribution to this debate is Jacob Hacker's (2004) recent article on policy drift. Borrowing from Kathleen Thelen's (2004) work on incremental change, Hacker demonstrates that a series of low-profile processes have gradually transformed the nature of the American welfare regime. Beyond the American experience, Hacker's article is relevant for the comparative literature on social policy because it gives a name to a powerful yet little-noticed mechanism of policy change that can slowly erode support for the welfare state and alter the balance between public and private benefits--generally in favor of the latter. (3) Labeled policy drift, this mechanism of policy change refers to the incremental transformation of stable social policy arrangements because of shifting socioeconomic circumstances and the lack of major legislative actions to address them. According to Hacker, new socioeconomic circumstances like demographic aging and the changing nature of labor relations and family structures can make existing social programs become less and less relevant in the absence of major legislative reforms designed to adapt them to such a new environment. From this angle, legislative inaction constitutes a form of political behavior that can let existing social benefits drift away from their original purpose and meaning, thus favoring policy change that strongly affects the lives of millions of workers and citizens. In all, Hacker suggests that deep institutional change may occur in the absence of sweeping legislative action. However, as Hacker acknowledges, recognizing the potential role of policy drift should not lead scholars to abandon the study of legislative revision (i.e., the formal legislative abolition, creation, or transformation of social programs). Legislative revision remains a potentially major source of policy change (Hacker, 2004). The following qualitative comparative analysis will provide ground to this claim by showing how policy drift, legislative revision, or a combination of both have altered the nature of--and/or the balance between--public and private pension benefits in the United States, Canada, Britain, and Japan.
Comparing Policy Paths: Policy Change in Four Countries
This section outlines significant divergences in pension development among these four countries falling into two distinct clusters. On the one hand, the United States and Canada exhibit significant policy drift coupled with minor legislative revision. On the other hand, Britain and Japan have undertaken major legislative revisions leading to more radical policy change. The following discussion explores major differences between and within these two country clusters.
Cluster One: The Prevalence of Policy Drift
The United States. Three main parts comprise the American pension system, which is based on a complex articulation of public and private pension benefits. First, the federal Old Age, Survivors, and Disability Insurance (OASDI) is a centralized earnings-related pension scheme that covers more than 95 percent of the workforce. The largest social program in the United States, OASDI is known as Social Security. Second, the Supplemental Security Income (SSI) is an income-tested, federal assistance program offering modest benefits to needy elderly citizens. In 2003, fewer than one million retirees received SSI benefits. Finally, tax-subsidized occupational pension plans cover less than 40 percent of the working population. These plans take different forms, from traditional defined-benefit plans to individual savings accounts (Sass, 1997).
Earlier than in other countries, fiscal austerity in the United States moved onto the federal policy agenda in the mid-1970s. At the time, high rates of inflation and unemployment coupled with an overly generous indexation system enacted in 1972 necessitated the passing of significant adjustments to Social Security five years later (Berkowitz, 2003, pp. 238-39). This Social Security reform took the form of indirect benefit cuts for future retirees through the creation of a new indexation system. Furthermore, the 1977 legislation included major payroll tax hikes. A few years later, new, short-term fiscal constraints forced President Reagan to put together a bipartisan commission leading to the enactment of legislation that did not alter the structure of Social Security. In addition to relatively minor benefit cuts and payroll tax increases, this legislation made provisions for a raise in the retirement age from 65 to 67 scheduled to come into effect only between the years 2000 and 2022. Such a long phase-in period reduced political risks stemming from this controversial measure (Light, 1995). Overall, the 1983 reform solved the short-term fiscal imbalance in Social Security. Since the mid-1980s, this program has even moved toward partial advanced funding, thus accumulating reserves sufficient to guarantee Social Security's actuarial soundness for several decades to come (Derthick, 2001; Weaver, 2005). (4)
Immediately after the enactment of the 1983 amendments, those seeking to transform Social Security adopted what right-wing experts Stuart Butler and Peter Germanis (1983) labeled a "Leninist strategy." According to this strategy, the only way... |
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