Deregulation, Market Forces and Restructuring: Welfare Debates since the 1990s

The trend towards political polarization that occurred in the 1990s became particularly apparent in social policy. Calls for deregulation, restructuring and dismantling of social security became increasingly loud. However, voters rejected both risky reform projects and substantial cuts to benefits.

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The 1990s were a turbulent time for social security. The end of the Cold War led to an increasing fragility of the basic consensus between the social groups that had shaped Swiss politics since the Second World War. As a result, political forces became polarized. Disagreement was exacerbated by slow growth and higher unemployment rates brought about by the recession of 1991 to 1995. This particularly affected the field of social security, which remained a highly contested area of policy.

On the one hand, the crisis had a direct impact on the social welfare system; unemployment and disability insurance in particular slipped into the red. On the other hand, social welfare institutions came under increasing pressure from the business community and the middle-right parties. There were calls for deregulation.  Arguing from  demographic change, they questioned the long-term financial viability of the social welfare institutions and fought against increasing the contribution rates in order not to jeopardise the competitiveness of the economy, and to maintain profit margins. In 1994, for example, the director of the employers’ association, Peter Hasler, called for a moratorium on the further expansion of social welfare. Leading exponents of the middle-right parties followed suit and called for a reduction in social expenditures. The business leaders around ABB president David de Pury, went a step further, issuing a "white book" in 1995. They called for overhauling pensions so as to guarantee only a minimal livelihood, with means-tested provisions for needy cases. However, the debates did not only revolve around the financial viability of social welfare institutions. Since the 1990s, right-wing and conservative circles have repeatedly criticised the allegedly widespread "misuse" of social benefits.

The left wing and the trade unions, as well as centrist political forces, regarded this white paper as an open provocation. They warned of an increasing loss of social solidarity and put their hopes in finding new funding sources. In 1994, Federal Councillor Ruth Dreifuss even felt compelled to issue an open letter to counter public speculation that the AHVwas on the verge of collapsing. Referenda on the revised Labour Act (1996) and on the urgent federal decree on financing unemployment insurance (1997) were test cases for a deregulated social policy that did not strike a balance of interests. In these cases the voters were not prepared to accept a reduction in benefits: All the proposals were rejected at the ballot box.

Literatur / Bibliographie / Bibliografia / References: Obinger Herbert, Armingeon Klaus et al. (2005), Switzerland. The marriage of direct democracy and federalism, in H. Obinger, S. Leibfried et al. (ed.), Federalism and the welfare state: New World and European experiences, 263–306; Année politique Suisse / Schweizerische Politik, 1990–1999.