The Politics of Choice: How the Introduction of Private Options Affect Preferences for Public Pensions, Schools, and Healthcare

Private alternatives to the public provision of welfare state services and benefits have expanded in almost all OECD countries over the past decades. It reasonable to expect that this trend will be and already has been exacerbated by the financial and economic crisis, since public budgets are tight. In this paper, we study how this change affects patterns of public support for the welfare state and, in the long term, the political sustainability of solidaristic social policies. Our core argument is that the availability of private alternatives has fundamentally altered the political dynamic of social policy-making. The political support from affluent middle and upper middle classes for a continued involvement of government in social policy-making depends on allowing more income-related stratification of benefits and services within the public system or in expanding private alternatives to an even greater extent. 

The first implication of our argument is that the availability of private alternatives makes public provision, and taxation, more contested along class lines. While demand for many services, and also for social insurance to a certain extent, traditionally offered by the state is high in the middle and upper-middle classes, the support for the class-blind distribution of public services has waned with the expansion of private alternatives. In this context it is paradoxically only when the public system mimics the private by allowing more choice and income-graduation that it is possible to shore up support for the public system. The cross-class alliance that propelled the postwar welfare state may only be sustainable by undermining one of its hallmarks: egalitarianism. A second implication of our argument is therefore that private alternatives are likely trigger inequalizing reforms of the welfare state. The focus of this paper is the first implication, and we present and test a formal model of social policy preferences that shows the implications of adding a private alternative to a standard model of social policy preferences. We test the model on comparative public opinion data from the International Social Survey Programme’s 2006 module on the Role of Government. The data are linked to national-level indicators of benefit stratification and the private-public division using a multilevel regression setup that closely mirrors the formal model. Our results cover (up to) 20 OECD countries.