Welfare Federalism in Germany and the United States: The Drivers of Wage Clauses in Public Procurement

Abstract: Federalism is often conceived as a liability for the welfare state: inter-state competition is said to create a race-to-the-bottom, while multiple veto players in turn hinder the possibility of welfare expansion. Yet recent developments in wage and procurement regulation challenge this assumption: In both Germany and the United States, Länder and federal states have increasingly used their buying power to introduce new labour regulations – pursuing social policy by other means than those traditionally granted by their prerogatives. Telling examples include the emulation of wage clauses among the German Länder prior to the 2015 federal minimum wage and the diffusion of Prevailing Wage Laws across more than half of US states. This article investigates how and why federal states in the United States and Germany use public procurement laws to advance social objectives such as labour market inclusion, fair working conditions, and gender equality. Empirically, it relies on an original dataset tracing the adoption of social clauses in procurement laws across 16 German Länder and 50 U.S. states since 1999, complemented with indicators capturing government ideology, trade union density, industrial structure, and administrative capacity. Analytically, it employs Qualitative Comparative Analysis (QCA) to identify distinct constellations of factors, conceived as pathways that lead to the integration of social goals into procurement policy. Juxtaposing Germany’s cooperative and the United States’ competitive federalism, this analysis seeks to shed light on how multilevel governance modes of cooperation shape opportunities for welfare reformism from below. By combining comparative design and cross-state data, it seeks to advance debates in governance and regulation research while providing evidence for ongoing policy discussions on socially responsible procurement.