ABSTRACT

The growth of welfare states is one of the hallmarks of modern capitalist democracies. European welfare states began with pension and social insurance programs in the late nineteenth and early twentieth centuries, and then grew into comprehensive systems of social support between the 1930s and the 1950s. By contrast, the U.S. state only began its excursions into social insurance and public assistance during the Great Depression of the 1930s, and was typically much less comprehensive in the postwar period (Skocpol 1987). Nonetheless, in the postwar period the welfare role of the state grew rapidly throughout the advanced capitalist world, as evidenced by significant rates of increase in state expenditure and taxation, particularly for social expenditures. But in thinking about the financing of the welfare state, it is misleading to focus on the rise in social expenditures alone, because taxes rose equally sharply (OECD 1985, 16–17). Thus when considering the impact on worker incomes, it is more appropriate to look at the net social wage: social benefit expenditures received by workers minus taxes paid by them. When this is positive, it represents a net addition to workers’ wages, a net transfer from the state to workers; but when it is negative, it represents a net tax on workers, which is a net transfer in the other direction.