62

In the past decades, social conditions were favourable in the rich welfare states of the West. Employment and incomes were on the rise and social spending remained high while passive welfare states were progressively transformed into so-called ‘investment states’ accompanied by an increasing policy focus on social inclusion and equal opportunities. Despite these favourable conditions, however, contemporary welfare states did not succeed in reducing poverty and inequality. What lies beneath the disquieting poverty standstill and how did welfare states miss this ‘window of opportunity’? In this article, we aim to shed more light on this question. We identify three structural trends behind the poverty standstill. First, work-rich households benefited most of rising employment rates while this has only been partially the case for the vulnerable workless households. Second, income protection for the working-age population out of work has become less adequate. Third, social spending for policies accommodating new social risks is primarily allocated towards higher income groups. Our analysis should not be read as a unilateral critique on the idea of the social investment state, but puts forward the hypothesis that social spending and, more generally, social redistribution in the social investment state have become less pro-poor.JEL: I32, I38, O52