Party Competition and Reforms of Unemployment Benefits in Germany: How a Small Change in Electoral Demand Can Make a Big Difference

This article shows how party competition has influenced reforms of unemployment benefits in Germany. The existing literature on German labour market policy emphasises institutional factors and predicts policy stability. Consequently, the recent fundamental reforms (‘Hartz reforms’) pose a challenge to previous research. By looking at the spatial configuration of the party system and at policy demand, this article argues that the incremental retrenchments of the 1980s and 1990s were conditioned by centripetal competition and a high degree of welfare consensus, whereas the more radical Hartz reforms were made possible by a limited shift in public opinion in favour of restructuring and the lack of a left-wing counterweight in the party system. Thus, the structure of the party system exacerbated the effect of a demand shift that was only moderate. The analysis is not meant to discard other explanatory factors, rather it intends to demonstrate the relevance of party competition to the study of labour market reforms in Germany and, more generally, to comparative welfare state research.