Do people with specific skills want more social insurance? Not in the United States

Skill specificity is thought to increase preferences for social insurance (Iversen and Soskice, 2001, American Political Science Review 95,875), especially where employment protections are low, notably the United States (Gingrich and Ansell, 2012, Comparative Political Studies 45, 1624). The compensating differentials literature, by contrast, suggests that neither skill specificity, nor labor market protections affect preferences when wages adjust for differences in risks and investment costs. We examine these competing predictions using U.S. data on general and specific skills. Absolute and relative skill specificity have a robust positive correlation with income, but are negatively correlated with preferences for social protection. Our results strongly support the compensating differentials approach.