An Asset Theory of Social Policy Preferences

TLDR

Workers with highly specific skills face long unemployment spells and thus strongly support social protection, whereas workers with general skills weigh costs more heavily. The authors present a theory of social policy preferences that emphasizes the composition of people's skills. The theory links skill composition to policy preferences and is tested using public opinion data from eleven advanced democracies. The analysis shows that differences in educational systems explain cross‑national variation in the level of social protection.

Abstract

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.