Edited by Bo Rothstein and Sven Steinmo

C H A P T E R T H R E E

Is America Becoming More Exceptional?: How Public Policy Corporatized Son'al Citize~ship

The Private Face of Social Insurance Exceptionalism

In 1950, T. H. Marshall suggested that "social citizenshp" rights were the last frontier in formal citizenship protections. First came civil rights and basic freedoms in the eighteenth century, second came political rights with the extension of su&age during the nineteenth century, and third came social rights with the development of national social insurance during the twentieth century. These three phases could be observed across developed nations.Yet in America, key social citizenship protections have been pro- vided by employers rather than by the state, and hence the right to social protections has become a right linked to employment rather than a right linked to citizenship. As new social citizenshp rights emerged in other developed countries, first to pension and health insurance and later to chddcare provision and parental leaves, America saw the development of parallel righrs withn the corporation.The process has magnified American exceptionalism. I argue that federal policy stimulated the growth of t h s employment-related system of coverage, via tax incentives that encouraged corporate benefits expansion and complex regulations that encouraged firms to establish internal bureaucracies devoted to complying with the law-bureaucracies that became vocal advocates for the further expansion of private hinge benefits-The paradox of American exceptionahsrn, then, is that governmental activism has been the driving force behind the expan- sion of private social coverage.

Tax incentives first helped to popularize corporate health and pension insurance in the 1930s and 1940s (Stevens 1988; Wooten 1997). Congres- sional signals that public coverage would remain inadequate, in the case of pensions, and non-existent, in the case of health insurance, also stimulated employers to build coverage (Dobbin 1993; Dobbin and Boychuk 1996). Congress has since developed a hcernable pattern of using tax incentives

52 Frank Dobbin

to ~nmulate employer-based bench and of using complex regulations to shape those benefits. The tax jncentlvw have targely h c e d these new benefits ('Howard 1997) and the regulations have created a n internal con- stituency within firms, in the form of accountants, human resources experts, and attorneys. with professional interests in the elaboration of these benefits.

Thls story helps to flesh out our understanrLng of the eEeccr of political institutions on policy development by sketching the public policy origins of the "shadow welfare state" that developed in the United States. The pr~vate system of welfare emerged largely in response to the institutional form public policy took In this realm, whch wxs in turn a consequence of America's weak party system. her peculiar federal state structure, and her weak adrmnistrative capacity in the realm of social coverage. These state characteristics contributed to public policies favoring corporate welfarism that depended on tax incerlnves and complex regulations.

Whde it was the state that stimulated corporate welfarisrn, that very wel- farism has contributed to the sense that the American state is weak-to the sense that American social coverage IS uniquely private in origins and exe- cution.The form of federal legislation governing employment-based social protections-tax inducements and rqplations enforced by private hnga- tion--did little to expand state responsibhties or authority.The legala~on did not dcmand new state powers or new state agencies of substantial aze. Moreover, because Congress turned over responsibhty for dcsigrung social protections to employers, managers and poIic)makers ahke came to h n k that corporanons were largely responsible for the various form5 of job-based social protections.

By charting these developments I hope to rnr izh the institutional prrspccuve on the origins of Amrrican exceptiondisrn. Early accounts of exceptionalism emphasized national character and political culture (Almond and Vzrba 1963; Inkeles 1979), but more recent accounts have traced excepnondism to the weak capacities of the federal state (Steinmo 1 994). 1 argue that federal institutior~al capacities helped to expand American exceptronahsm in this case. First, the we& party system and weak labor trahtions tntant that it would be difficult to assemble political back- ing for an ambitious federal program in any of these realms of social cw- erage, leaving liberals who wanted new social protections with only one option, that of using tax expenditur~ to encourage the expansion of pen- sion, health, maternity, and childcare coverage (Steinmo and Watts 1995). Second, the weak party structure and weak federal adninjstrative capacities led Congress and several Afferent administrations to adopt not a single tax- financed federal program in each area, but a complex set of regulations that required employers to hire a team of experts to make sense of the law and to construct compliant fringe benefits programs (Dobbin and Sutton 1998). Adrrunistrative weaknesses that precluded the forceful imposition of a simple system had the perverse effect of buildng adrmnistrative strength witlun corporationr. The new persomel/benefits team, whlch had been

built to respond to complex federal regulaoons, became an internal con- 5tituency that successfully lobbied corporate executives for the expansion of private coverage in each realm. Thus weak federal institutions spawned an elaborate private system of pmtections4beit a system rife with holes and inequality of coverage.

The Origins of American Exceptionalism: Culture or Structure?

Politicd science and polihcal sociology long atrributed Amencan excep- tionalism to a culture of individualism and to anhsociahst and anti-union sentiments. In these accounts, America's belief system was what &tin- pished her h m her European counterpam. Institutionalists have chal- lenged these accounts, suggesting that it is not a set oi hsembodied norms that marks the Umttd States, but a set of concrete political insntutions that delun~t what is practicable and what is imagnable. From t h s institutional perspective, policy institutions sustain political culrure.

Sren Steinmo (1994, 1995; Steinmo and Watts 1995) argue:. that America's weak party system, her weak labor tradrtions, and her weak gov- ernment institutions make it exceedingly ddcul t to pass and put into effect ambitious social programs. Ovtrr tune, the cumulative effect of these weak- nesses is a relatively small fedenl burcaucraq and a thln social safety net.The face d & t y of these assertiom is substantial, for a series of ambitious social enpeering projects has beer] undermined by weak state capacities and by a tendency to mll back new programs. In the long run, the Progressive Era, the New Deal, and tht. Great Society programs have had modest egects- their most ambitious elemenb have been hsrnantled and their sratist visions of the future have not been reahzed. Edwin Amenta (1 998) has shown, for instance, that America's weak party system contributed to the &mantling of an aggressive job-provision system pioneered under the New Deal.

Steimo.hr~enta, and others have charted the egects of America's pecu- liar political Institutions on the evolution of public social coverage, or more speci6cally on the failure oi a system of public coverage to evolve. My god in t h s chapter is to chronicle the effects of America's party system, of her federal structure, and of her admin~strative capxities on the evolution of corporate coverage. On the one hand, the weak party system has tended to produce not ambitious public social Insurmce programs such as those found in Northern Europe, but public ~ncentives for private employment- related programs that are financed by employer and employee contributions and Eocegone tax revenues. On the other hand, the weak party system and weak administrative bureaucracy combme to generate not a single federally defined standard in each area of social coverage, but a complex set of reg- ulations designed to maximize employer freedom (this is a consequence of the weak party system) and to be adrmnistered by the courts as h e y inter- pret the law ( t h s is a consequence of tht weak administrative hureaucracyl. The result of these federal weaknesses oriented to mar~nuz lng prlvate

freedom is an elahorate and hghIy variable system of corporate social pro- vision, backed by 3 serieq o i complex and highly specialized corporate bureaucracies that (a) lobby i n d u s q fi.orn w i t h for voluntary expansion of benefits and (b) sn& the admini~trative. legislative, and judicial \\lnds for signs of legaI changes that might justify further growth of corporate pro- grams.Thus the result of these federal initiatives to expand the soc~al safety net is an elaboration of the private corporate social ~nsurance syscrm, whch has had the eKect of rnagnifylng American excrptionalism.

The congressional side of the story of how tar; i1lcentlves were used to Gnance a shadow welfare state in America has been well told (Howard 1997; Wootet~ 1997). Here I chronicle the organizanonal side of the story, bringing ~t up to date by showing a pattern across four distincc benefits areas. The most basic point to be drawn Gom &us story 1% that American welfare esceptionalim~ depends on two institutions, thdt of our seemingly weak state and that of our seemingly strong corporations. The weak state is a fiction, because relatively modest state pohc~es have stimulated a flurry of activity and a host of new structures and programs in private corporations. The strong corporations are a fiction as well, for those corporations act largely in response to publii policy rather than in response to internal dynamics.

My method is comparative, but the comparisons are across policy realm? rather than acros nations. Institutionalists usually use one of two methods to show that national political structures matter. One method is to contml for policy arena and vary national pohncd institutions, showing that different countries approach a common problem in clfferent ways.The other method is to control for political institutions and to vary policy arena. showing t1wt a single country approaches hfferent problem in a consistent uxy (Skocpol and Sorners 1980). I pursue the latter approach, s h o w that in the case of several dfierent policy r e h , and across much of the twen~e th century, America's peculiar state insnmtions have produced a common pattern of tax incentives and corporate regulations. T h e e tax incentives and regulations have generated a common pattern of response among trnpluyers.

In the secuvn that follows L describe the pattern by whch government inducemenu led corporations to institutionah four kinds of social pmtec- tions.Then 1 de~cribe In empirical terms how, since the 1970s, employers have come to insntutionzhze maternity leave, chddcare provisions, pension insurance, and health insurance. In each case. the state criated itlcenhves for employers to build or expand private soci;d protections. I t1 each case, employers responded by creating new ofices to signal a desirr to comply with the law, and to scan the environment for concrete jdefi ahout how to comply. In so doing they institutionalized a nlodrrn version of corporate "welfare work," and created corporate constituencies devoted to expanding corporAte social protections-in new human resources management, andhscrimination, and benefits specialists.

Note that my argument is parallel to that made by others who considrr the rolz public policy has created for labor unions in labor market and

social insurance management (King and Rothstein 1993, 1994; Western 1994). Where pubIic policy ~nstitutionalized the role of labor unions in labor markets and social insurance provision, by making them key to job allocation or to the hstribution ~Eunernployment or other social insurance benefits, labor i~nions have grown accodngly in numbers and in adrmnis- trative capacity. By contrast, where public policy has excluded labor unions from key roles in managing labor market and social insurance system. unions have declined in both membership and administrative capacity. ~ikewise, where public policy has given responsibility for soclal coverage over to private employers, those employers have developed uniquely strong ~nternal bureaucracies for administering social coverage. Those bureaucra- cies become internal advocacy groups pushlng for hrther expansion of pri- vate benefits. Hence exceptionalism, whether American or Swedish, begets exceptionalism.

How Weak State Capacities Stimulate Strong Corporate Capacities

I.bcuk Parties, Weak Labor, L I ~ Social Provision via Tm incentives

Two aspectr of Amencan state capacities are salient here. America's weak party qystem and her weak labor unions have contributed to the form that legislation takes. Ths part of the puzzle has been well documented, and hence I do not dwell upon it here (Howard 1997; Steinmo 3995;Amcnta 1998). America's weak party system is itselfin part a consequence of feder- alism and reglot~alisni. Federalism makes it possible for the chef ofstate and the majority in the legislature to come fiom different parties, and when this happens legislatiat1 is based on compromise. The strength of political regions. as compared to pol~t~cal parties. produces a pattern of cross-cutting political cleavages in the 1egislature.Where regon can take precedence over party in legislative bodies, regional coahtions have the capacity to subvert the goals of the majority parry-even when the majority party holds the presidency. In parliamentary systems, by conmst. the head of government is at the very least the leader of thr largest pnrl~amentary coahtion. And in classical parliamenhry systems, parties exercise d~sciplinr: over the voting ofmembers, such that regional consideratlonr takr a back seat to party con- siderations. In consequence, in parliamentary systems, left-leaning parties that hold power have demonstrated a subqtantjal capacity to pass ambitious publicly funded social insurance programs. In the Un~ted States, Demo- cratic presidents have found it d16cult to pass attlb~tious social insurance programs even when their party holds J tnajorlty in Congress. Democrats have often settled for making incremental changes that depend on forgone tax revenues to subsidize corporate social coverage. Thus this system encourages the growth of employment-based social programs that are funded clrert1)- h m corpvrate and employee contributions, and indirectly horn foregone tax revenues, because those contributions are tax deducnble.

56 Frank Dobhin

State ln~fitutional Weakness rltld the Eiaboratio~ of Corporate Stfudure

My focm in this chapter is not on the policymaking side of this process, but on the consequences of policy for the growth of corporate welfarism. How have public poLcy incentivrs contributed to the institutior~alization of private social insurance? First, the weak party system tends to produce compromise legislation rather than set a clear federal standard for corpor- ate social provision. This results in regulatory ambiguity and complexity designed to maximize employer 6ecdom. Thus employers 6nd themselves with a great deal of discretion in designing bznzGts programs, and tend to hire experts to do the job. Second, the weak federal bureaucracy fosters the reactwe articulation of federal swndardc in the courts rather than thr proac- tive articulation of standards by the public bureaucracy. Thus employers tend to htre experts in the law who can track emerging legal norms and tailor benefits programs to those norm.

In consequence. employers create ~n ternal bureaucracies staffed u ~ h experts whose careers depend on corporate welfarism, and who thus become vocal management-level advocatts for the expansion oE corporate welfarism.

Regulalov .4mbiguity and Complexity America's federalism and her weak party system combine to favor legisla- tion that takes the form of broad guidelines rather than of clear mandates about how corporate social insurance systems should operate (Edelman 2WO,1992; Dobbin et al. 1993).Thus employers must design their own pro- grams, but they must do so in the context of uncertainty about how exactly to comply with the law. Thv have responded by hring experts in tax law and 6inge benehtr, who can devise programs that appear to comply with the law.

Regulatory ambiguity and sotnplexity lead employers to create profes- sional departments not only to devise compliance mechanisms, but also to signal to regulators an intention to cornply. As Meyer and Scott argue, "Each [U.S. organization] is more likely to have officers that symbolize safety, the environment, a6rmative action . . . and so on" (1992, p. 275). As Edelman (1992) and Dobbin zt al. (1988) found in the case of regulations pruhiblang employment discrimination, firnu typically s ign1 an intention to comply by establishing new offices. Marshall Meyer (1979) argues that observers, and extension the courts, take slpding in the form of ofice- creabon more seriously thrn signahng by announcement-by advertising a new goal or policy-largely because creating a new ofice is not cost-file. By establishing a new office, moreover, organizations absorb complaints spawned by new legislation. Thus when a university establishes an aErma- tive action ofice, "The environment is thereby signaled that (a) affirn~ative actiorl principles have been accepted by the university in question, and (b) thew is an ~ndividual to contact should affirmative acbon questions arise" (Meyer 1979, p. 494).

These offices try to make sense of the growing regulations that govern benefits dmctly, and also of seemingIy unrelated regulatory arenas that may influence benefits programs. For instance, the Civil Rights Act of 1964 guarantees the right to nondiscrimination in employment. In 1972, the ~ ~ u a l Employment Opportunity Commission ruled that employer failure to treat maternity leave like other leaves for disability constituted sex hs- crirnination. They reasoned that if an employer ofFcrs duabhty pay to men

sprain their ankles playlng football with their children, she ought to have to offer such pay to women who are away from work due to child- birth. Many large employers responded by rewriting their disability provi- slons, offering maternity leave pay for the very first time even before the legal stanhng of the EEOC decision was clarified by the Supreme Court- which in fact overturned the EEOC position (Kelly and Dobbin 1999).

Regulation as a Moving Target The relative weakness of the adrmnistrative branch and the relative strength of the courts has contributed to the corporate sense that employment law is a fast-moving target. Other common law countries permit juhcial inter- pretation, but the United States Constitution guarantees the courts a par- ticularly powerful position. Other civil-law countries give the courts little power to interpret the law (Merryman 1969). Firms have responded to the inconstant character of employment law by hiring specialists to track changes in the law and to try to prehct evolving federal standards. They charge these offices with scanning the environment for defensible compli- ance mechanism (DiMaggio and Powell 1983; Meyer and Rowan 1977).

As Meyer and Rowan argue, when the federal government began to pay attention to environmental safety, organizations set up internal units that could scan the environment for new compliance solutions: "environmental safety institutions make it important for organizations to create formal safety rules, safety depamnents, and safety programs" (1977, p. 350). Once new compliance mechanisms are approved by the courts, they act as powerful prescriptions for corporate behavior (Edelman 1992; Abzug and Mezias, forthcoming). "Subunits established to scan a particular part of the environment typically hire persons with expertise limited to one nar- row segment" (Pfeffer and Salancjk 1978, p. 270). Here the institutional argument is not unhke the argument Lawrence and Lorsch (1967) make, that environmental hfferentiation spawns organizational differentiation. Lawrence and Lorsch argue that organizations d gain resources to the extent that their structures match environmental demands. In the words of the systems theorist Walter Buckley when the organization has acquired fcatures oriented to the variety in the environment, "we say that the system has mapped part of the environmental variety and constraints into its organization" (1 967, p. 63).

In the American context, we see this smctural elaboration particularly in realm where the law is subject to constant arnendment.Wages and hours legislation, for insrance, is relatively stable and unambiguous. Hence we do

58 Fmnk Dobbin

not see the rise of new sub-units within firms charged with interpreting the law and drsi_gning corporate practices to comply with it. However, in r e h where the law is hghly variable over time, such as safety environ- ~ncntal protection, equal opportunity, and fringe benefits, employers do tend to create new depxnnrnts (Dobbin and Sutton 1998). Ths suggests that it is temporal variahilicy in legil interpretation that drives the creation of there department?;.

T h e Growth of at1 Itrr~r nal Cot~stituency -for Corporate Wc&rism Thus the function of administering social protections becomes institution- allzed within corporations, r~t l ler that1 in the state or in labor unions. The manager< who are charged with these tasks develop commitments to the program they devise, and to the noclon of corporate welfarism.This is pre- cisely the process of constituency iorrnation that Philip Selznick (1 957) documented, whereby new organizational duties develop constituencies among the managers charged with carrylng them out.

The Privatization of Social Protections in Four Realms

Congress has generally extended social protections by creating induce- ments €or employers to establish private protections. rather than by creating public programs. Social Security (for old age). Aid to Farnil~es w ~ t h Dependent Children, Medicare (health coverage for t he elderly), and Mehcaid (health coverage for those in poverty) arc the primr exceptions. In other realms, public inducements for employer-pruviilrd cuvrrage have taken the form of tax incentives. In the case of maternity leave, civil rights law proved to be an inducement as well. Federal tax incent~ves for hinge benefits date to the 1920s, although by most accoullb those incentives had little effect u n d the income tax was broadened to cover most of the work- ing population, in the 1940s. In this section I chronicle changes i11 federal tax treatment of pension and health regulations in the 1 WOs, and a g I n in the 3 970s, and trace these changes to the growth of emplover-prov~ded coverage. I then chronicle the effects of federal law on the growth of cor- porate provision of maternity l e a v e t a x treatment, workmans' compensa- tion, and civil rights law all played roles here. Finally I turn to federal tax treatment of childcare assistance. Each change in federal law. I argue, cre- ated an ambiguous yet complex regulatory framework that w~ subject to juhcial review and amendment. Thcsc rmgwlations rncouraprd corporate social coverage, and they encouraged the eiaboration of corporate benefin bureaucracies attuned to managing compliance. Members of those bureau- cracies became vocal advocates for expanhng corpu~ate benefits.

Congress first created tax incentives for private perlsions in 1926. In 1942, in the context of the downward expansion of income tax to all but the poorest of Americans, Congress made corporate expenditures {OK both pensions and health insurance tax-deductible. At the same time, Congress created personal income in the form of pension and health benefits as

nonta~able.Th~ decision had the effect of s h h n g much of the cost of cor- pra te pension and health bcnefits away fmm corporations thenlselves and

111 cmployees, and toward the federal government. in 1974 Congress the Employee Retirement Income Secur~ty Act (ERISA), also

kt~own as the Pension Reform Act, cxpand~ng federal tax incentives for cn~ployzrs creating certain kinds of benefits programs. The new law

regulation of penslons and health Insurance programs financed ~ t h fcdzral tax incentives and also covered corporate expenhtures for rempomq hsabiliry insurance and a number of other programs. In 1972 the EEOC had found that employers olt'er~ng temporary hsabilit); cover- age to worken must extend the coverage to workers disabled by pregnancy. Thus by 1975 employers were deducting expenditures for a host of hEer- ent programs, including pens~on coverage, health insurance, and maternity leave wages finance J by temporary disability insurance programs. Meanwhde in 1973, the Internal Rrvet~ue Service ruled that corporations could deduct their expend~turrs tbr employee childcare, and Reagan's 1981 Economic Recovery Tax Act extended t h i ~ exrnption. Tax expenditures clearly subs~dized corporate welfarism in A four of these realms.

As I d argue bclow, America's weak political and administrative instl- tutions produced Iegislauon in each realm that gave great discretion to employers. Federal admmstrative weakness prevented the executive bnnch from developing clear prescriptions for how corporate programs should be structured. As a consequence, firms were left to des~gn their own progranls and they were left in some doubt about the eventual lephty of the pro- grams the): d ~ d design. In each realm,, judicial interpretation waq a moving

target. I t \..as in h s context that employers significantly expanded the role of I xne I i t s experts, institutionahzing the benefits funchon wthin the firm to the end of maclung changes in the law and adjusting corporate benefits

ac~ordlngl~. In effect, the iveakness of the federal bureaucracy stimulated the elabora-

non of the corporate bureaucracies dealing w t h welfare provision. Those who staffed these bureaucracies became internal advocates for the expansion of the corporate bcnefih function.They advocated new programs that antic- ipated legal changes and thry advocated using corporate benefis for recruit-

ment, retention, and motivation of employees. Feden1 law, in short, spawned an internal conshtuency for c.orporatc benetits program- constituency that was typically represented on the rop marwgement team by a vice pres- ident of human resource managrmml and a vlcc prrsident of benefits.

Fede~ul Lnw and thc Rirr of Private Old Age and Herllth Insuraruc

Congress first used tax incent~ves to encourage employer-provided pcnslons in 1926 and they first u ~ e d incentives to encourage employer-provided health insurance in 1942. The Kevenuc Act of 1926 allowed employers to deduct the cost of pension contributions and shelter the income on jrlvested penrlon funds born mat ion (Wooten 1997). In 1939 Congress rqunded

60 Frank Dobbin

the scope of Social Securlty coverage without expanhng contributions to the program and employers interpreted these changes as indicating that Social Security would not provide an adequate retirement wage (Dobbin 1992). The Revenue Act of 1942 war quite consequentid from a tax per- spective became it extended the incomr tab: to most Americans and made health as well ar pension insurance contributions tax deductible, providng employers made coverage available to rrlost employees.

The Employee Retirement Income Srsurity Act of 1974 ex-anded the regulation of pension and hedth benefits and again used the carrot of tax incentives to win corporate compliance. New fiduciary regulations were voluntary, but f i rm that d ~ d not comply with them could not deduct their pension expenhtures from corporate profits.The act was designed, like the Revenue Act of 1942, to encourage employers to offer pension and health coverage to ali employees. Contributions to plans that discriminated aginst low-wage empluyees were not drducrible.

Thus on the one hand, ERISA used foregone tax revenues to finance corporate health and pcnsion i n s u r a n c m d a range of other Ginge ben- efits as well. On the 0tht.r hand, ERISA carried an aggravatingly complex and often ambiguous set of regulatory guidelines designed to (a) maximize employer latitude whde guaranteeing plan solvency, and (b) ensure that employers could only deduct contributions that actually benefited employ ees and that benefited low-wage as well as high-wage employees. By h a - matically expandmg federal regultjon of pension and health plans, ERISA encouraged employers to h r e new benefits speciahsts. Despite the fact that the regulatiorls increased the cost of insurance and the administrative costs associated with openting plans, they had a positivc effect on the popular- ity of both pension and health insurance.This was the case, at least in part, because the new rekqiations stimulated Grms to h r e tax and benefits experts who heralded the advantages of pension and health programs, in terms of both taxation and employee management.

T h e Ambiguity and Ccvnplexity qfof~en@ts Regulation ERISA regulated hcalth insurance and other fringe benefits, as well as retirement programs (Skolntk 1976). One goal of the act was to guarantee the pension and health insurance promises employers made. In addtion to creating more stringent fiduciary requirements for ptnsior~ plans, and regu- lating health insurance and other fr~ngr hrnefits, ERISA insured private plans through the Pension Benefit Guardnty Corporation. A second god was ro insure that pension and other benetit plans would be offered demo- cratically to all categories of employees, and this was accomphshed by mak- ing kinb- benefit plans that were restricted to the corporate elttz twable.

The final draft of ERISA w a s not for the feint of heart--only a tax attor- ney could make sense of it. It was widely viewed as "the most complex piece of leeislation ever passed by Congress" (Tepper 1977, p. 105). By 1984, the act and Internal Revenue Code aniendmrnts to it U e d 320 pages (Gdl 1985). Kather than dictating the sort of uniform guidelines for

p a l o n s and health insurance found 111 some European countries, the act dowed employers to devise their omn plans but repluldted potential abuses of those plans in fine detd. In consrquence, mrtually all employers were [nrced to restructure pension and hedth Insurance programs; in order to nlJke sense of the complex regulations they hred tax accountants and tax law-yen and often established entirely new benefits departments.

The result of the legislation was that virtually every firm in the Umted States had to rewrite its pension plan, and m the process many rethought benefit schemes more generally In the immedlate wake of the leglslahon. at least 300,IK)O company pension plans were rewritten {Klein and Moses 1974). Because the leglslat~on created a host of new regulations, rather than sketching a single penslon standard, firms found that they had a whole ros- ter of declslons to m~ke.Virmallv all companies changed vesting reyulre- ments. Most altered financing schemes and began contributing more money to prov~de the same level oE benefits. One survey showed that a quarter of compames xwtched from flat rate plans, in whch the pension provided a specltied amount each month, to o&et plans, in which the pen- sion was guaranteed to supplement Social Secur~ry income to a combined, preset level (Mzyer and Fox 1974, p. 53; Meyer 1981). Moreover. ERISA required employers to submit periohc, detailed reporb on their pension programs to the Secretary of Labor, inclultng annual statement; ot' pro- jected benefits for each employee (copies of whch went to employets).To redesign plans and write these reports, most large employers hred benefits experts if they &d not already have them.

Employer Rcxponre: T h e Creation c$ Neu~ BeneJits Departments An article in IJeersonnel in 1980 concluded that ERISA, in combination with thc restructuring of Soc~al Security in the early 1970s, had boosted per- sonnel administration and promoted the g m ~ h of the benefitr function: "Personnel activities in many org,ulizations [were] becoming increasingly important-largely bccause of the high cost of labor and benefits, the neg- ative impact of government rekwlations, and the necessity of planning for future manpower needs" (Zippo 1980, p. 66). By the end of the 1980s, a survey summarized in Busincss Insuranrr reported great optimism among benefits managers about the fumre of the field: "Respondenh most ofien said that increased government regulation not only provided more respon- sibhties for employee benetits departments, but added emphasis and cred- lbility t o their function In the corporation" (quoted in Geisel 1989, p. 15). And as one executive described the effects of the expansion oiER1SA; "We see firms creating p o s ~ ~ o n s that did not exist five years ago. Therr are so many Inore headachrs such as problems caused by legislation" (quoted in Geisel 3 989. p. 15).

Wherras civd nghs legislation had created a cadre of quasi-lawyers to revise and update organizational employment and promotion practices, ERISA created a cadre of quasi-~ccountants who could r a i s e and update

62 FrC1nk Dobbin

benefit progratns and provide ongoit~g documenting of legal compliance both upward, to thc state, and downward, to the employee.

The effect on the prrv;drt~cr of benefits departments and personnel departmenu can be seen r t ~ figures 3.1 and 3.2. The data come from a ret- rospective survey I conducted uith John Meyer, W. R. Scott, and John Sutton-details are reported in Dohhin and Sutton (1997). The 6gures qhow the proportion of 279 orgatlizatians that reported each type of office, annually. Each type of o 6 c z ~ncre~se i l dramatically in popularity after the early 1970s. These 6 p r e s capture ordy part of the effect of the law, for many employers that had these deparrnwnt5 before 1970 upgraded them after 1974, and many organizations too small to establish hstinct depart- ments nonetheless hired specialists to handle federal compliance.

55 58 61 64 67 70 73 76 79 82 05

Year (1 900s)

Figure 3.1 Proportion of Employers with Personnel/WRM Clffice

I I

_.-a r -

: : : : : ! : ! : : ? : : : : : : : : : : I I : \ \ : : : 55 58 61 64 67 70 73 76 79 82 85

Year ( 1900s)

- Benefits Onlee ----- EEOlAA OfItcelr

Figure 3.2 Pmpnruon with Beuekitr Clt?i~-fl and EECI. 4A C)ffice/r

Benejits Departments and the Expannm~ cf Pcnsion Cor~t-ru~qr New corporate bcnefih departments champ~onrd the expans~orl of pension p r o p m s &om the mid-1970s. Despite the fact that the new leglslatjon caused the <ast of pensions to rise, private pension coverage expanded si@cantly.

N e w regulations caused employer costs to rise for several reasons. New 6ducjary requirements and insurance provisions forced employers whose perwon schemes were underfunded to add significant capital.According to some estimates, the cost of the average pension plan rose 15 percent as a result of the legidadon (Hakala and Huggins, 1976). ERISA also liberaIized vesting requirements-the polnt at which accrued pension benefits become nonforfeitnble in the event of termination of employment- reducing time to covenge for new employees and consequently increasing the cost to employers. A Conference Board study in 1972 found that the modal time to vesting among private firms was fifteen years. Seven years later, after the implementation of ERISA, no employer reported a time to vesting of more than ten years (Dobbin and Boychuk 1996). This change increased employes' pension costs as well.

But benefits expers began to aggressively promote generous pension and h d t h coverage to cxcutives, linhng benefits packages to the firm's human resources strategy. Ths approach harkened back to the 1920s and 1930s. when proponents oi corporate "welfare work" argued that benefits could Improvt. emplovee morale and encourage worker cornnitrnent (Brandes 1 !V6; Btody 1980). By the early 1980s, Fred Foulkes (1980) was advlrlng 6 r n ~ to use benzfin to win employee loyalty and squelch urlionism, survey- Ing urivnized competitors and bettering their pension and benefit programs. Othes were describing elaborate benefits packages as part of the strategic hunwn resource hnction of the firm, arguing that they should be coorh- nated with corporate strategic planning and with projections for the reten- tion and advancement of workers wirh s l u l l s that woilld be important to the firm's prosperity (Greene and Roberts 1983, p. 82; McCaffcry 1986, p. 18).

Dcspitc the rising cost of pensions, these betle6ts champions caused firms to expand coverage significantly. F~gure 3.3, which reports the

Year

Figure 3.3 Propuronr~ r>CAmcrican Employees with Private Pension Cowrage

64 Frank Dobbin

1 ;

t960 1965 1975 1985 ! Year

Figure 3.4 Pmportion of Employers with Matcmity Leave Programs [

f

proportion of full-time American workers participating in private pension plans, shows the effects of h s legslation (U.S. Bureau of the Census 1975; U.S. Treasury Department 1975-1 985). After the 1974 legislation, private pension coverage rosc substantially. In these years, personnel journals encour- aged employers to install new pension programs and to expand exlsting pro- grams. They touted the tax advantages of deferring wages via benefit plans. They also helped to popularize Indwidual Retirement Accouna, whch are not included in the data reported in figure 3.4, as a means to use payroll deductions that would take advantage of federal tax savings.

BeneJits Departments and the Expamion $Health Insurance The sponsors of ERISA sought to parantee the benefits promised by employers in a number of realms other than pensions. The legislation explicitly covers "medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeshp or other training programs, or day care centers, scholarshp funds, or prepaid legal services" and the pension provi- sions extend to income deferral plans for retirement, severance pay, and supplemental retirement income plans wein 1986, p. 72).

Uenefits administrators succeeded in popularizing health care plans after 1974 as well, and introduced a much wider range of health coverage options, h m cafeteria-style benefit plans that allowed workers to apportion their benefit dollars among a range of hfferent benefit options, to managed care plans. Figure 3.5 shows the resulting gmwth of group hospitahzation insurance, whlch is purchased by ernployers.Thc data come Gom the Source Book of Health Insurance Data, 2 9 8 4 1 985 (Health Insurance Institute of America 1985). After remaining flat for the first half of the 1970s, group health insurance coverage rose dramatically during the second half of the 1970s and the early 1980s.

Federal Law and the Rise of Corporate Maternity Leave and Childcurc

In the early 1970s, federal administrative rulings encouraged employ- ers to establish both maternity leave and childcare programs for their

1875 Year

Figure 3.5 Numhtr ofAmerim with G r o ~ p Hospi&uon Insurance (033s)

employees. Maternity leave programs and chddcare facilities, both of which had been the province of government in much of Western Europe. thus came to be designed and built by private ei~lplo~ers in the United States. I argue h t federd antidiscrinunatio~, law, l a x law, and benefits regulation helped to promote both programs .at the corporate levrl. These l aw had direct effeca, and they also had inhrect effects by generating new positions in equal employment, and benefits adnlrnisaacion. The occtl- pants of these new posiuons tracktd subtle changes in federd law, promot- ing the creation of maternity leave and chldcare programs after relat~vely obscure administrative rulings favored them. Had employers not put equal nppnrnlniry, benefits, and personnel cxpcrts into pla~e, il is unlikely that they would have learned of thesr administrative r u l i n g In chis cast, by hr- ing expem to track changes in the law, employers made themselves acutely sensitive to subtle shfts i n the legal er~virontnent in those part idar realms of law. These experts were particularly important given the federal govern- ment's weak apparatus for promulgating new employment replations- professional journals and mocjations in the 6ddr of human resources and benefits have berome the most important source of information aboui reg- ulatory stuf ts . Those journals and associations champion new compliance program as part of their profession-building function. with the ex~licit goal of expanding the corporate roles of their subscribers and members (Eclelrrian, Abraham, and Erranger 1992).

It was not deliberate congressional action that fostered maternity leave and childcare programs, but minor administrative rulings that were not \h-idely known outside the field ofpersnnnel ahnistration.The ruling cre- ated negative sanctions in one case and positive inducements in the other. A 1972 EEOC ruling that &scrimmation on thr basis of prepancy ronsti- tuted sex discrimination under Title VII of the Civil R~ghts Act provided a negative ssanctiotl thar rr~couraged employers to oiTer maternity leave. A 1Qf3 IRS ruling that employer childcare expenditures were tax exempt created a positive inducement for employers to offer childcare.

66 Frart k Dobbin

In both cases, these new program5 wrrr financed in part by foregotie tax wvenues. In the case of maternity [rave, replacement pay came &om federaly backed temporary disabiliry insumnce (TDI) programs. Corporate expendrtures on t h s form of insurance were thernselve~ tax deductible, and thus when employers expanded programs to cover maternity leave they faced increased out-of-pocket costs, but they were able to deduct those costs and to thereby shift part of the burden to the federal government.

In the case of childcare, substantial funhng came through foregone tax

revenues. An adrn~nistrative ruling in 1972 made employer chddcare costs tau deductible, and the Economic Recovery Act of 1 981 further institu- tiorlalized the right of employers ~ n d employees to deduct childcare costs.

Ambiguity in Civil Right3 Loiv Ambjcguity in antihcrirmnation law led employers to develop extreme sen- sitivity to thr utterances of public officials. Many expanded their personnel office5 or estabhhed hstinct equal employmrt~t opportunity or afEnnative action offices to ensure that their pnctlces were m compliance wit11 the law. When federal officials suggested that failure to offer disability pay for employees absent due to materrmy comtituted sex discrimination, these new experts lobbied thrir employers to extend hsability pay to cover maternity.

The ambiguity of the Civil Fhghts Act, which ouda~vt.d &scrimination without defining it, had spawned a np-\v personnel function w i t h n the firm. Following congressional reinforcement of the Civil Rights Act's employment stipulations, in 1971, pecsotu~cl journals advised employers to hire legal expcrts to design c q l ~ d employment and affirmative action pro- gran~5.Those cxperts were also charged with traclung changes i n case and admmstrative law and adjusting employment practices accorhngly. It was those expertr who, in the context of a high-pro6le court challenge to EEOC guidelint-s stipulating that failure to cover trlaternity hsabhty under temporary hsabclrry insurance constituted sex discrimination, advised thcit employers to get ahead of the ball and Install maternity leave programs to inoculate themselves against suits. Notwithstanding the fact that the Supreme Court evt.ntunl15: sided with the challengers, overturtlmg the EEOC r d n g , huge numbers of companies jumped on the nlaternicy leave band- wagon, led by their equal employment specialish (Kelly and Dobhin 1999).

New personnel and AA/EEO offices had been spawned by Tltle VII of the Civil R~ghts Act of 1964. which outlawed employment discrimi~lation on the bsis of race, color, religiorl, qex, or natlond origin (Farley 1979, p. 12).Thr Equal Employment Opportunity Commission was given cl~arge n t Title VII. Corporate depaments were given a furthcr push by Lyndon Johnson's Executive Order (EO) 1 1 346, which required federal contractors to rake "aff~rmatlve action" to end inequality (Burstrirl 1985; Edelman 1990). Neither law mentioned any spc.cific compliance standards at all. The ambiguity of the law left einplovrrs in the dark about how. e.uactly, to comply. The Civil Rights Act outlawed discrimination without giving employers any hint about holy to comply. Johnson's executive orders d ~ d

not define "afirmative action" (Edelrnan 1992). In the early 1970s. Washington stepped up enforcement of both the Civil k g h t s Act and ~ ~ h ~ l s o n ' s "afiirmative action" order but did not clarify the xandards of

The new federal commitment to enforcement, coupled with the continuing ambiguity about compliance standards, led nmny employers to establish separate departments ta take charge of compliance (Cabor 1987: Br~dshaw 1987; D~~Kivage 1985, p. 362).

Elnployer Response: EEO/AA Departrnentr In the ~~~at~agement practitioner literature, writers advocated the creation of separate AA/EEO departments. Some outlined the complex record-- keeping and reporting require men^ that were created in thr early 1970s as part of afirrnative action compliance. In an article cided "ATotal Approach to EEO Compliance," Giblin and Ornati argued that complrance denlanded that organizations "establish an internal a u d ~ t and reporting systrrn to rnon~tor and evaluate programs" ( 1 971, p. 37). Others outlined positive strategies for placing and promoting women and blackr, including formal tesnng, quota system, arid rules that would formalize Illring and promotion to preclude rnanagrrial favoritrsm (e.g., Bell 197 1; Bassford 1974). Barbara Boylc wrote i n the Harvnrd Business Review that equal employrnerlt administratio11 required the establishment of a separate EEO office. "at the highest practicable level in thc organization {i.e., ouhide the personnel office].The cstablish~nent of an affirmative action progain is not costly-its absence is" (1 973, pp. 88-9). Antonia Chayes (1 974), in an arti- cle in the same venue tided "Make Your EEO Program Court-Proof," rec- ommended the naming of an Affirmdive act jot^ ofKcer a t a minimum. The authors of a 1973 ardcle in Pmonriei suggested that to comply with the law, penonnel departme-nt~ would have to "require more of these specialists-- to upgrade thew knowledge and sk~lls, to kriow more abour testing, statls- tics, and psychology, and especially, more about what constitutes success in jobs" (Saben 1973, p. 351.Tbese effort? tnet with substantia1 succrs5.A~ early as 1975, Giblin and Ornati (p. 45) observed that man): organizations had created separate EEO/AA o6ces. Many 0th r r s created or expanded their prrsonnel departmenw.These changes can be seen in figures 3. t and 3.2.

Thus federa1 law created a new org~nizational constituency of personnel specialists and antidiscriminanon expera.These groups SJLV in antidiscrim- inanon law the potential for expnnding their orb.anizational roles. In 1974, an article in Personnel promoted the positive spino& of EEO law. On the one hand, it gave personnel administrators a chance to expand their duties w:tkun the organization and tu establish new departmenm. On the other hand, it g v e them a chance to institutionalize and expand their mahtional expernse in the areas of employee selection and advancement (Froehlich and Hawyer 1974, pp. 63-8). In the same yrar, another article suggested that EEO law provided an ideal justification for lrxpanding the personnel func- hen, showing that a university personnel department had grown markedly

Frank Dobbin

by using EEO law to take control over all non-academic recruitment and screening (Garris and Black 1974).

New Personnel Dep~rtrnents and he D$usion ofMarernity Leaw Programs Once they had a toehold in organizations, new personnel and EEO/AA specialists advocated personnel programs that would e ~ ~ a n d their mles in the corporation. They became a constituency for the elaboration of social protectiom, such as maternity leave. Their power lay in them expertisc In federal regulation, and it w a s ohen by exaggerating the risk oClitigation that they succeeded in expanding personnel actinties (Edelman, Abraham, and Erlanger 1992). Because corporations had installed in-house experts in empioytnent regulation, and charged them with scanning the environment for changes in the law and for models of compliance. they learned of even minor adrmnistrative rulings affecting them in short order.The profession4 persolme1 journals spread the news about such rulings.

C i d rights le@Iation had been mute on the issue of maternity leave, bnt m 1972 the Equal Employment Opportunity Commission ruled that hs- crimination on the b ~ i S of pregnancy constitutes a violation of Title VII. It also ruled that employers should treat pregnancy as they treat any other tern- porary hsabiljty. This meant that employers who offer temporary disabht): insurance, as enlployers in five states were required to do and as employers in the other forty-five states were encouraged to do, should makr &ability paymetls a d a b l e to workers who are disabled by pregnancy.

Lower courts issued mixeci rulings on this issue before the Suprrn~e Court, in 2976 (General Electric Cn t~ Gilhcrt et aI. 119761 429 U.S. 125) ruled against the EEOC position. Between 1972 and 1976, coverage of sev- eral court challenges by the news rnedia and by personnel journals had made ernployrr~ent law experts aware of the emcrgng tederal position, and this manslated into substantial change in corporate practices.Two years after the Supreme Court finding in favor of General Electric. Congress passed the Pregnancy Discrimination Act of 1978 to codify the EEOCT position. It requ~red employers to treat pregnancy like any other medical condit~on in their health insurance and temporary disability programs. While neither the EEOC ruling nor the act required employers to estab- lish formal lllaternity leave programs. from 1972 corporate EEO/AA specialis& argued for and won such programs.

Now that materniv status was encornpasscd. at least loosely, by civil righu law, personnel managers advocated a cohfied, uniform policy. They argued that the only way to ensure compIiance with the Pregnancy Drs- crirnination Act w a s to create formal programs with cxplicit rules gowrri- ing maternity leave. Without such programs, they argued, the treatment of pregnancy would be left to the discretion of ~nhvidual managers-The risk that particular managers would violate the iaw was too great to bear. they contended. Only a formal maternity leave program with explicit rules gov- erning eligibility, return to work, period of leave, compensation during leave, and the length of time a job would be held open, could inoculate an

against discrimination suic;. The effects of these events can be seen in figure 3.4, whch reports the proportion of employers in the survey hscussed above, with maternity leave programs. Formal matermty leave programs increased in number after the earlv 1970s.

During the 1970s and 1980s most large employers adopted formal maternity leave programs. Jn the 1980s many, fearfil of discrimination suits. established new offices to manage work 2nd farmly mattrrs.The Family and Mehcal Leavr Act of 1993 bolstered the authority of these new work/ family offices, as well as the authority of HRM and EEO/AA of6ces in corporations.Thu new law required employers wit11 at least fifty employees to make up to twelve weeks of unpaid matermty, paternity, and rnehcal Irave (for self or for care oifarmly member) avadable to employees with at least one year, or 1250 hours, of work experience with the employer. Compensation during maternity leave cont~nued to be pald from Tem- porary Disabkty Insurance funds, whch were funded hrectly by employcr and employee contributions and indirectly through foregone tax revenues.

Corporate Chlidcare Rovkim As in the case of maternity leave, the lcgal watershed that promoted cor- porate chldcare provision came in an administrative ruling In the early 1970s. In t h ~ s case, ~t was a shift in tax law. In 1973, the year h e r the EEOC ruled that discrimination on the basis of pregnancy violated TitleVII. the I~lrernal Revenue Service (IRSJ ruled tha t employer childcare expenses were ta>; deductible. Ths produced an incentive for employers to provide workers with childcare, because compensation in the form of childcare provision would not be taxed whereas compensation In the form of salary and wage payments would be.

Full corporate sponsorship of childcare progranls would be quite expen- sive even if the federal government was piclung up part of the rab, so the spread of corporate childcare centers was slow. Where they &d appear, it was typically through the work oithe employment-law speci;dists that had been hired to manage EEO and AA law-personnel managers in small 6rms and EEO/AA specialists in large onzs.The tax experts that firms had hired to make sense of the Employee Renrernent Income Security Act ai 1974 also championed childcare benefits.

I t was after the passage of the 1981 Economic Recovery Tax Act, and with its subsequent innovative interpretation by corporate personnel and benefits experts, that corporate chddcare programs really began to take off. For the most part, benefits experts had understood the 1973 ruhtlg to cover direct employer expenditures for childcaw.The 1981 act created Dependent Care Assistance Pmgrmx, which were designed as a way to make corporate exyend~tures for childcare m deductible for both employer and employee. Tw trcattnent of childcare contributions would be parallel to tax treatment for pension and health contributions. The original idea was that employers should be ablr to build a childcare center or to provide vouuhcrs For use by employees. In either case, expenses would he deductible. Moreover,

Friltrk Dobbin

0.3

0.2

0.1

0 1975 1 985

Year

Figure 3.6 Pmporr,c>n oi Emplwc6 iv~dr I lrpendenr Care Assistance P h

employers who make uap~tal e?cyet~dttures for chldcare facilities could use favorable amort~zat~on schedules. This reduced the cost of building such faclhtjer.

As Erin Kelly (2(100) has shown. benefits consultants worked to develop a program with a sllghtly difitrtnt approach, permitting employees to contribute to a childcare fund h m which they could be reimbursed for expenditures using before-tax dollars. It w a s these programs that became most popular-programs In which the employer's only contribution w a s to set up tax-free spending accounts and deduct the contributions to those accounts h r n employee paychecks.

Thus benefits experts devised the Drpendent Care Expense Accounts (DCEA) as an inexpensive way for employers to offer chddcare provision, financed entirely by foregone tax revenues and employee contr~butions. In most cases, these accounts were not used to 61lance employer-prowded chddcm centers, but to subsidme the purchasr of care in the local market. Employees contributing to these accounts through payroll deduct~ons do not pay taxes on the income they contribute, w h c h they use to pay for childcare. In 1990 the Child Care Act further l i b e d z e d the terms of DCEAs (Plcck 1992; Uureau of Nahonal Affars 1986), eniouraynfi more ernployem to set up programs.

As in the case of maternity leave. it was benefits and civil r~gh ts profes- sionals within corporations that promoted c111Idc;ue prosrams to execu- nves, arguing that Dependent Care Expense Accounts In partlculdr could increase the net income of employees with ch~ldcare costs a t very Jittlr cost to the employer.

Figure 3.6, whch contains data Gom a survy of over 1 00 large errlploy- ers reported in Witkowski 1997, charts the growth of dependent care assls- tance plans, the tax-exempt chddcare accounts. over the y e r ~ o d . Over half of the large employers sampled had these programs in place by the early 199(k.

Conclusion: The Institutionalization of Exceptionalism

In the early nineteenth century the French philosopher Henri de Saint- Simon worried that private, aristocrat~c corporations might supplant the

statr in the Liws of c~rizens. They might undermine the & a c t relationsh~p between cjtizetl ~ n d state. Saint-Simon anticipated well what has been hap- prmnp ill the United States. Corporations have taken over respons~tr~l~ty for ,l,uch of what T. H. Marshall (1 950) described as right? of social citizenshp.

Two characterlst~cs of American exceptionalism-weak worlung class political organizat~on and a weak s t a t e a r e thought to work apimt the

of social protections. However, since the 19605, new protections have been institutionalized through a process that docs not depend on strong working-class organizations or a strong state. Instead. policymakers devised new regulations that would encourage pnvate employers to extend social protections. The third hi-et of American excrptiorialism-weak social insurance-was thus transformed. as state policy produced an elabo- rate insurance system based on enlploy~nent rather & ~ n ciazenshp.

Congress's history of relucrance to dctate to tirtns has produced a pat- tern of elaborate regulations, across sevrral realms of enlployrnent law, that specify what &rm cannot do. Instead of' setting a s~ngle scanilard for pensions, for instance, Congress, under the guise of maximizing employer freedom in the design of pcnrion programs, wrote a 300-page manual of Byzantine regulations.The pattern of corporate response to America's klghly complex, ambiguous, and constantly evolving employment regulations has been described by institutionalists studying civil rights, occupational safety, and other realms oE the law mobbin et d. 1988; Edelman 1990; Dobbin md Sutton 1997). The ambiguity and complexity of federal regulations causes e~riployers to h e special~sa to make sense of the law and to dtvisc local conlpliance solutions. In the case at hand, new federal benefits and civd r ~ $ h regulahons ied ta the proliferation of personnel, antidiscrimination. and benefits ofices in dlr 1970s.The new sptciahsts occupymg these oftices hrc.mr a consnturncy for the expansion of employment-related social pro- tectlons, convincing execunk-es to anticipate changing legal norms and to use benefits to recruit, retain, and motivate workers. In consequence. hrms 1n5ralled pensiom, health jnsurance, maternity leave programs, and childcare assistance in largc numbers.

What makes& American state exceptional here is not its refusal to pay for social protections, for these soc~al protections were financeii largely through "tax expendmxes," or foregonu tax revenues. Paid maternity leave has for the most part been financed by government-backed tetnporary d~s- ability insurance programs. Childcare, pension insurance, and health insur- ance have bccn financed in large measure by tax incentivts that transfer a large proportion of the final cost to the federal sovrrnmerlt. What makes the American state exceptional is the h c t that it makes betletits nomi- nally private rather than public and aes them to employment rather than c~nzenshp.

This is not what T. H. Marshd predicted, for he thought that social pro- tections would be based in citizenship alone. In the United States, federal policy has created a three-tiered system based in ernploymcnt status. In the areas I have hscussed, federal policy subsihzes benefits for the emplovrd

72 Frank Dobhirz

but not for thr unemployed. Even in arenas in whlch the American state has developed its own social pmgram-old age insurance, health care for the aged, and health care for those in poverty-pubtic policy creates a two- tiered system in w h c h the employed, or formerly employed, population enjoys a hgher level of benefits. Federal tdx incentives have also uninten- tionally created a h r d , intermediate tier. In the namc of democratizing benefits, federal policy requires employers to extend benetits to all emplop ees, or to face tax penalties. Employers responded by definltlg a thrd cate- gory, between that of employee and non-employee, of conmct. temporary, and part-time workers who are "non-employees" and who arc therefore inehgible for benefits. These groups of workers have grown rapidly since the 1970s (Pfeffec and Baron 1988). And of course, because benefits pro- grams arr: largely voluntary, many 6rm have yet to off&r coverage.

How is it that America's "weak" federal state can cause private employers to create elaborate new social protections? We have seen that the rhetorical weakness of the American state hldes a substantial capacity to effect change at the workplace, but a capacity that chderlgzs current weak state/strong state formulations. In the cases we have explored, it appears that whde the American state has a weak party system and weak adrrunistrative capacities, its legislzture's inclination ha? been to encourage the private sector to build a social insurance net of its own.The growth In corporate bureaucracy, and In corporate duties, we saw in these four realms chd not emerge through some sort of ~nternal dynamic: these change emerged in direct reaction to federal pohcies. What we saw w;as a weak state deliberately making the private sector expand.

Ths is not to say that corporate welfarism is producing a private version of the universal welfare state we have seen, at certain times, in Northern Europe. As noted, the American system is spottier because it is voluntary, leaves the unemployed uncovered, and leaves a growing group of "contin- gent" workers out. Mareover. by sapping middle-clas support for publ~c social programs-the middle-class depends on employment-related pro- grams-this system makes i t hard for politicians to garner bachng for expanding the public safety net (Esping Andzrsen 1985). Finally the insti- tution ofjuhcial enforcement mcans that firms can fail to comply with the law with impumty. Even where employers offer pension, health, chldcare. and parend leave progranls, those programs may fail to meet governmeilt guidelines and hence the benefits may be clEcult to obtain and may. not he insured.

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