An Asset Theory of Social Policy Preferences

This paper presents a theory of social policy preferences that emphasizes the role of skills. The key to our argument is that individuals who have made risky investments in skills will demand insurance against the possible future loss of income from those investments. Most income is derived from past investments in skills, and because the transferability of skills is inversely related to their specificity, workers with specific skills faces a potentially long spell of unemployment, or a significant decline in income, in the event of job loss. Workers deriving most of their income from specific skills therefore have strong incentives to support social policies that protect them against this uncertainty. This is not the case for general skills workers who will be more concerned about the costs of social protection. We test the theory on public opinion data for 12 advanced democracies, and suggest that differences in educational systems explain a substantial portion of cross-national variance in the level of social protection.