Can Updating Workers’ Skills Prevent Backlash against Economic Modernization?

• In Event: AI, Automation, and Political Attitudes

Abstract

Welfare states struggle to prevent a political backlash against economic modernization because most compensatory social policies only target workers after they build resentment against modernization. Therefore, welfare states have begun to preventively invest in updating workers’ skills to prepare them for modernizing economies. Employers are heavily involved in implementing these skill policies which distinguish them from financial transfers or publicly provided services. Yet, little work focuses on how firm choices moderate the effect of social investment-oriented skill policies and, ultimately, the political consequences of economic modernization. Hence, our research project examines how firm behavior moderates the effect of welfare states on political backlash against modernization. In other words, what is the effect of welfare state investments in workers’ skills on (a) firm behavior during economic modernization and (b), ultimately, political backlash against modernization? Our case is the Danish AMU system, the country's main policy scheme providing highly subsidized training courses to both employed and unemployed workers. We use micro-level evidence from the Danish registers, which includes all participation in AMU training and allows us to identify if firms use training to manage structural change inclusively. Furthermore, we use local election results and links between the registers and survey data to analyze individual-level outcomes. Importantly, we use a major reform of the AMU system as an identification strategy for the effect of public investments in training policies on both firm behavior and, ultimately, individual-level outcomes.

Authors

• Leon Küstermann

• Kees Van Kersbergen, Vrije Universitet Amsterdam

• Francesco Colombo, Aarhus University