Demographic shifts, globalisation, digitalisation and climate change are transforming existing jobs and giving rise to new forms of work. These megatrends have an impact on welfare states. European welfare states offer some of the world’s best social protection, standards of living and working conditions, and these efforts represent a significant share of government spending. Yet, the four megatrends are putting pressure on the labour market and welfare states, creating winners and losers and contributing to the rise of inequalities within and between countries. For example, new forms of work may provide opportunities for vulnerable workers, but these jobs may be of poor quality and only partially covered by the welfare state. Such employment structures may also contribute less to the funding of welfare state, potentially undermining its sustainability in the longer run. Already shaken by the global financial crisis and the COVID-19 pandemic, welfare states now find themselves facing even greater challenges.