Equality, Employment, and Budgetary Restraint: The Trilemma of the Service Economy

Abstract

This article presents an analysis of the postindustrial economy from a political economy perspective. It identifies a set of specific distributional trade-offs associated with the new role played by the services sector as the chief source of employment growth in advanced democracies over the last three decades. It is argued that three core policy objectives—budgetary restraint, wage equality, and expansion of employment—constitute a political “trilemma” that allows only two of the goals to be successfully pursued at the same time. Using a combination of statistical and caseoriented analysis, the authors demonstrate the political and economic salience of the trilemma, the distributional tensions inherent in each strategy to cope with it, and the political-institutional constraints under which these strategies are chosen.

Building a sustainable welfare state

“…Post-industrial change has created a 'service sector trilemma' in which the goals of employment growth, wage equality and budgetary constraint come increasingly into conflict. 4 Creating private service sector employment on a large scale entails lower wage and non-wage costs, while generating such employment in the public sector is constrained by budgetary limits. Given the limits on running high public deficits in the long run, once again there appears to be an inescapable trade-off: we either accept high unemployment or countenance greater inequality.…”

Diverse Disparities: The Politics and Economics of Wage, Market and Disposable Income Inequalities

“…The literatures on partisanship and public policy on one hand, and on the role of economic institutions in shaping labor market outcomes on the other, clearly suggest that the next big hurdle in disentangling the politics of inequality is to take on a multidimensional approach and model the interplay between different sets of political and institutional factors and the distribution of income. Efforts in this direction are a new frontier in the comparative political economy of redistribution and inequality (Beramendi and Anderson 2008;Iversen 2006;Iversen and Wren 1998;Rueda and Pontusson 2000;Iversen and Soskice 2006). In this article, we join these efforts to advance our understanding of the multidimensional character of the politics of inequality.…”

Public Debt and Economic Growth Economic Systems Matter

“…Iversen and Wren (1998) e.g. state that there is a trilemma with respect to achieving employment creation (i.e.…”