Technological Shocks, Welfare Arrangements, and Policy Responses

• In Event: Economic Shocks, Inequality, and Changed Representation

Abstract

According to a growing number of empirical studies, one of the main effects of contemporary changes in technology is the polarization of occupational structures and wage distributions in advanced industrial countries, increasing labor-market vulnerabilities in some segments of the labor force while expanding opportunities for others. But the political ramifications of rapid technological change in the workplace remain poorly understood. In particular, the effect of technological vulnerability on a variety of outcomes such as demand for different types of government intervention, political efficacy, and support for certain political parties remains insufficiently tested. In this paper we examine the effect of priming worries about technological change at the job site versus that of other common threats, such as international trade, on these outcomes.

We hypothesize that the individual’s relative risk profile (i.e. how, given their occupation and skills, would they be affected by an intensification of the technological content of production processes) will affect her degree of support for different state interventions designed to address the welfare consequences of these changes. Those negatively affected by the distributional consequences of these changes will either demand compensation policies directed at curbing these effects (ex-post interventions), or even policies aimed at directly containing the intensity of these transformations (ex-ante interventions). Secondly, we argue that the redistributive profile of existing welfare state can account for the variation in preferences: compensation policies are expected to be less attractive if the welfare state is perceived as more sensitive to other individuals’ distributional concerns. We thus advance a theoretical explanation for why, under certain conditions, traditional compensation policies might not be politically appealing for negatively-affected groups, and why they might demand instead more radical policy responses.


In the context of an original survey designed to measure public views towards these transformations and fielded to working-age individuals in a large and complex European economy (Spain) in the Fall of 2018, we analyze the impact of randomly priming technological versus trade-oriented concerns on support for many outcomes, including the policies that should be implemented to respond to these changes, political efficacy, and political party support. We find that individuals negatively affected by technological changes are significantly more concerned about technology in the workplace, more in favor of ex-ante interventions in order to restrain the pace of these changes, but, quite puzzling, do not find evidence that they support more intense ex-post intervention of the state. Traditional compensation policies do not seem to be particularly attractive by those groups that should benefit from them. Also, we find that beneficiaries from technological changes, when primed with the expected consequences of these changes, support more welfare state ex-post compensation. We discuss what can drive these results, and speculate over the political consequences of these distribution of preferences, in the form of support for populist or anti-establishment parties.

Overall, our paper thus has important implications for the changing social basis of support for the welfare state under the distributional shocks associated with an intensification of the use of technology, and can also help us understand why traditional compensation packages are politically problematic in the current context.

Authors

• Dulce Manzano, Complutense University of Madrid

• Jose Fernandez-Albertos, CSIC