The welfare states of affluent democracies face severe budgetary strain, increasing policy rigidities, and growing political controversy. Although these developments are often attributed to shifts in the global economy, three post-industrial transitions have been at least as important: the relative growth of the service sector, the maturation of governmental commitments, and population aging. These transitions create an environment of ongoing austerity, but the strength of support for public social provision in most countries makes the dismantling of the welfare state highly unlikely. Instead, successful reform is likely to be based on compromise and to take the form of restructuring and modernization of the social contract. The article concludes by outlining a research agenda for the investigation of this reform process.
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