Government ideology and labour policy reform in good times and bad

Abstract

Which governments implement interventionist or liberalising labour policy reforms, and does the economic context matter? Drawing on the previous literature on government ideology and public policy, we hypothesise that leftist governments are more likely to implement interventionist labour policies. However, we also expect that economic circumstances influence parties’ room to manoeuvre, and we thus hypothesise that the impact of government partisanship on labour policy reform will be weaker during troublesome economic circumstances. The main contribution of this paper is empirical, in that we take seriously the ‘dependent variable problem’ of policy studies that look to aggregate measures to detect instances of retrenchment, by making use of a new dataset on the directionality of 1,446 individual labour reform measures enacted across 13 nations between 1978 and 2017, allowing us to compare government labour policy during periods of varying levels of budgetary deficit, employment, and debt levels. Our results show that left-wing governments implement more interventionist labour policies, but only during less economically ‘challenging’ periods – during dire economic circumstances, economic orthodoxy seems to trump ideology in governmental policy-making processes.