Comparative scholars fundamentally disagree about the impact of partisan politics in modern welfare states, particularly in certain ‘new’ policy areas such as active labor market policy (ALMP). Using new data on 900 ALMP programs across Europe, this study attempts to reconcile a long-standing dispute between the traditional ‘power resources’ approach and the ‘insider/outsider’ approach pioneered by Rueda. The study argues that both left-wing and right-wing governments invest in ALMP but that politics still matter because parties’ preferences regarding unemployment differ. The left is more inclined to expand programs primarily designed to reduce unemployment, which exclusively target ‘core’ groups in, or at risk of, unemployment, and programs in which participants are no longer counted among the unemployed. In contrast, both sides are equally prone to expand programs that also—or instead—target people who are not yet participating in the labor market, which thus also—or instead—serve to increase labor supply.

Employment subsidy programs have experienced considerable expansion across Europe in recent decades. To date, most studies analyzing this policy shift have assumed that these programs are largely equivalent in terms of their designs, effects, and explanations. In contrast, this article argues that employment subsidies are best understood as versatile multi-purpose tools that can be used as means to rather different distributional ends. Using Multiple Correspondence Analysis to explore novel data from hundreds of employment subsidy programs across Europe, this article develops a new typology based on two overarching trade-offs. The typology highlights that employment subsidies may be designed to counteract as well as to sustain insider/outsider divides in the labor market, and that they may be designed to tackle either structural or cyclical labor market problems. In a first empirical evaluation of the typology, programs with different designs are found to vary systematically in terms of distributional outcomes and starting conditions.

Conventional wisdom among comparative political economists maintains that the participation of employers in policymaking and policy implementation, fostered by corporatist arrangements, is crucial to the successful expansion of active labor market policy (ALMP). This article introduces a transaction-oriented theory of corporatism, partisanship, and ALMP that challenges the dominant view. It argues that corporatist arrangements do not affect the overall scope of ALMP but facilitate particular types of ALMP programs, ones that require the joint participation of employers and the state and involve a transfer of public resources to employers. Corporatist arrangements facilitating such programs—which center-right parties tend to prefer over those produced unilaterally by the state—also shift the focus of partisan conflict over ALMP from the level of public expenditure to the structure. Evidence for these claims is provided by time-series cross-sectional analyses of twenty-one OECD countries since the mid-1980s.