The compensation hypothesis goes east: FDI and welfare state demand in postcommunist countries

Abstract

While existing research provides evidence that globalisation sparks citizen demand for the welfare state in wealthy Western democracies, less is known about how globalisation affects public demand for welfare elsewhere. This study explores the link between globalisation and welfare preferences in postcommunist countries by examining workers at multinational corporations (MNCs). These workers have previously been found to have lower levels of job security, even in Western Europe. Additionally, in the postcommunist context, MNC employment also frequently offers better opportunities than other available jobs. This combination of risk and benefit creates higher demand for social insurance (such as unemployment insurance) because MNC workers have both higher job insecurity and higher costs of job loss (if the benefits of MNC employment make it difficult to find an equally good job). Original survey data from Ukraine shows that MNC workers experience greater insecurity and are paid more than other workers. They also express preferences for more expansive welfare programmes, prioritising those related to labour market insurance. This pattern of MNC workers' experience and preferences is confirmed in cross-national survey data from 30 peripheral economies, demonstrating that the compensation hypothesis has wider application than previously shown.

Comparison of changes in the labour markets of post-communist countries with other EU member states

“…On the one hand, the MNCs are associated with higher employment and higher wages. On the other hand, however, they are associated with higher job insecurity (Beesley, 2020). The inflow of the FDI is probably the most apparent in the field of retail market, on which the share of multinational super and hypermarkets increased up to 50% (Dries et al, 2004).…”