12 Chapter 2 2.1 Introduction Milton Friedman famously once said “You cannot simultaneously have free immigration and a welfare state” (1999). He argued that a country with open borders and access to generous welfare provisions would become a haven for poorer migrants which would place a significant fiscal burden on the host country. Consequently, increasing immigration may present serious challenges to Europe’s relatively generous welfare states by exposing tensions between the inherently closed system of the welfare state and the relatively open economies of developed nations. Indeed, some authors have gone so far as to argue that increasing immigration in Europe will eventually lead to the Americanisation of European welfare states and politics (Alesina & Glaeser, 2004; Alesina, Glaeser, & Sacerdote, 2001). On the other hand, current empirical evidence on the topic in Europe is mixed (Lipsmeyer & Zhu, 2011; Nannestad, 2007; Soroka, Johnston, & Banting, 2006; Stichnoth & Van der Straeten, 2013). In the political economy literature, there are two key competing theories that attempt to explain how immigration, or globalisation more generally, may affect national welfare states. They are known as the efficiency hypothesis and the compensation hypothesis. The former is linked to the arguments above and argues that increasing globalisation will alter the supply-side of social protection through forcing governments to retrench social protection schemes in order to stay globally competitive and reduce the fiscal burden of migrants (Gaston & Rajaguru, 2013). The latter argument focuses on how the demand-side for social protection is altered by globalisation, leaving governments in open economies no choice but to expand the welfare state in order to insure citizens against the risks posed by globalisation, such as the job insecurity brought about by increased labour migration (Walter, 2010). In light of these arguments, this article fits within a larger theoretical debate regarding the influence of globalisation and growing economic openness on national welfare states in Europe, in particular concerning the increasing movement of people. This article extends previous research (Gaston & Rajaguru, 2013; Lipsmeyer & Zhu, 2011; Soroka et al., 2006; Soroka, Johnston, Kevins, Banting, & Kymlicka, 2016) by taking into account arguments from Scruggs and Allan (2006) and Starke (2006) that studies researching welfare policy change should complement expenditure data with additional quantitative measures. Social spending only provides one dimension of welfare state effort, the size of the budget, and so this article augments social spending data with the welfare generosity index developed by Scruggs et al. (2014). Through the use of both indicators, this article contributes to the ongoing dichotomy by illustrating that there is a lack of evidence to support the conclusion that increasing immigration is detrimental to or incompatible with European welfare states. Alternatively, increasing immigration may lead policymakers to actually increase welfare state effort.
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