Abstract

Policy decisions during and after the New Deal tied the U.S. social contract to the employment contract, by conditioning eligibility and benefit levels for core welfare-state programs on work status and performance. The resulting system of social provision, however, embodied a set of assumptions about labor-market conditions that began to unravel with the structural economic shifts that began in the mid-1970s. Work was expected to provide open doors to employment, stable floors of security and stability over time, income ladders promising adequate and rising earnings, and safety nets providing public and/or private protections against unforeseen or unavoidable hardships. Each of these assumptions was undermined by fundamental changes in the market, and this, in turn, has redefined patterns of social provision. As a result, core welfare-state programs have become less effective at meeting their own objectives of providing adequate social protections for rising numbers of working Americans. These trends preceded the recent recession and weak recovery, and cannot be reversed by the return of robust growth or pre-recession employment levels, in the absence of more fundamental change in the social contract. The roots of the current dilemma lie in the 1930s-40s, when politically mobilized employers fought alongside conservative policymakers to constrain the scope of the original system of social protections during and after the New Deal. In recent decades, they have battled to keep even this limited system from reaching those it was intended to assist, by blocking or limiting reform initiatives in areas such as employment policy, the minimum wage, health and pension insurance and modernization of the unemployment compensation system.