Welfare and Labour

Welfare states and labour markets, although organized, financed, and delivered in different ways across European Union (EU) countries, are a central issue in European Political Economy. Bound by common fiscal constraints, in the context of the Economic and Monetary Union (EMU), Member States have aimed to enhance labour market participation, while modernizing their welfare states and, at least in principle, maintaining a high level of social standards. Against this backdrop, the chapter addresses how national welfare models co-exist within the EU and explains how they are influenced directly and indirectly through the EU’s multi-level governance structure. We first outline key concepts and challenges pertaining to European Political Economy of welfare and labour markets. Then, we illustrate how this policy area has evolved, before and after the international financial crisis of 2008, from a period of EU-induced austerity to a focus on enhancing social rights for EU citizens. Drawing from different strands of literature, the chapter discusses the main theoretical and empirical theories and concepts in regulating social policies and labour markets in the multi-tiered EU institutional setting. The chapter includes three case studies, on social investment, which aims to enhance skills development, to enable competitiveness and to maintain social solidarity; on the conflict between labour and capital emerging from the regulation of intra-EU migration and posted workers; and the challenges to achieve common social rights across the EU—exemplified with the case of the EU’s work-life balance directive. All three case studies pertain to welfare states and labour markets in the EU, but they reflect challenges which are also present globally, in International Political Economy.