Why, according to Iversen, have the low-skill equilibrium countries and the high-skill equilibrium countries adopted such different approaches to labor markets and social protection? In view of their explanations, is there any room for the United States to move toward the European model?
Globalization has slowly opened the doors of many countries, to many countries, and with such phenomenon, competition amongst them has been inevitable. With such phenomenon, nations have had to adapt their public policies in such a way that provides them with the highest competitive advantage. A nation’s competitive edge over another has been, amongst other things, a product of several specific investments by both workers and firms in human capital within their own country. Some, like most European countries, have invested in promoting a specific-skill workforce whilst others, like the United States, in a general-skill workforce. These particular investments on human capital that distinct nations have made throughout history, is what, according to Iversen, dictates a nation’s particular social protection schemes. Indeed, as globalization expands and competition gets tighter, Iversen explains the common challenge that nations face of adapting their human workforce to the international market, why certain policies are being chosen over others as well as the impact these might have on a nation’s competitive advantage.
Amongst the OECD countries, people are free to choose the line of work they want to embark on. Depending on the work of their choosing, it would seem intuitive enough to posit that an attainment of particular set of skills is necessary in order to thrive at the particular chosen job. This reality extends itself to the pre-industrial era, but just as industrialization started to spread, people that had chosen a particular type of job tied to a particular type of skill faced the possibility that their skills and job would render obsolete. Indeed, many countries have had political and economic institutions such as job security, wage protection, union organizations, health and pension benefits, and many others for protecting the human capital in which people have invested. However, is it the pressure and frustration from people that see the possibility of their skills becoming obsolete that leads to a particular type of social protection? or is the opposite a more convincing hypothesis? Certain countries have a predominantly high-skilled labor force whilst others have a predominantly general-skilled, or so called low-skilled workforce, and to better understand this reality, Iversen argues that “having in place some form of protection is a precondition for people making investments in specific skills in the first place”1. Indeed, this statement suggests that the specific type of skilled (low or high) workforce a nation retains, is a product of the type of social protection policies that are in place.
Social protection however, Iversen continues, “is clearly not only about insurance, it is also about redistribution and political conflict”2. A clear example of the dynamics between political conflict and the quickness in which new technologies are being introduced (which leads to high-skill jobs becoming obsolete) is in the publishing industry. Its in the United States, where unions are known to be extremely weak, one could see the first publishing houses like LA Times and Oklahoma city, introducing new technology whilst European counties, where unions were relatively strong, “were fighting bitter battles, sometimes violent to delay the introduction of new technology”3.
Since most European countries have had important and tight social protection policies, workers in these European countries would find a clear incentive to invest in high-skill related jobs. Since deindustrialization poses a threat to these workers due to the possible emergence of new technologies that lead to skills becoming obsolete, one can easily
